What Counts as a “Material Fact” Under the NC Real Estate Commission
In North Carolina real estate law, few mistakes get agents in trouble faster than omitting a material fact. But “material fact” is not a rigid term — instead, the NC Real Estate Commission (NCREC) treats it as a flexible concept, guided by precedent, statutes, and the Commission’s own bulletins and rules.
Legal Basis and the Duty to Disclose
Under N.C. Gen. Stat. § 93A-6(a)(1), the Commission can discipline (suspend, revoke, reprimand) a licensee who makes a willful or negligent omission or misrepresentation of a material fact. The Commission’s rule, 21 NCAC 58A .0114(c), likewise frames a material fact as one “that a reasonable person would recognize as relevant to a purchaser in deciding to purchase the property,” and the suppression of which could “reasonably result in a different decision.”
That said, the statute and rule don’t (and can’t) list every possible scenario. The Commission recognizes the boundaries must be flexible to allow for change over time, but it also offers categories and examples to guide agents in real transactions.
The Four Categories of Material Facts (As the Commission Frames Them)
To help agents think concretely, the NCREC describes four broad categories in which omissions or failures to disclose often trigger liability. You should use these as a disclosure checklist in practice.
Facts about the property itself
These are internal or on-site defects, system failures, or conditions that would naturally concern a buyer. Examples include structural issues, roof leaks, foundation problems, electrical or plumbing malfunctions, water intrusion, or termite damage. (These are sometimes referred to in Commission bulletins as red flags visible on inspection.)Facts that relate directly to the property (external or contextual factors)
These are external influences or constraints affecting the use, desirability, or value. Think zoning changes, restrictive covenants, pending roadway expansions, or proximity to noise sources. Even though they lie outside the property’s boundaries, such factors can influence what a reasonable buyer would do.Facts that affect the principal’s ability to consummate the transaction
These concern the buyer’s or seller’s capacity to close. For example, a buyer may depend on selling an existing home before financing the next; a seller may have unresolved liens, title defects, or impending foreclosure; a buyer may have loan qualification risks. Such circumstances can be material if their nondisclosure would influence a party’s decision.Facts known to be of special importance to a party
These are facts beyond general concerns, but which a particular buyer or seller has communicated as critical to their decision. For instance, a buyer expressly states a desire to avoid homes near a noisy bar or wants a property with no flood risk. Once a party expresses a special interest, the agent’s duty to investigate intensifies.
Some facts are always material — those that any reasonable buyer would expect to know (e.g. a house in a known flood zone, visible structural damage, or substantial defects in major systems).
Illustrative Examples (Recast from Commission Bulletins)
A broker lists a property knowing from a prior survey that the driveway encroaches onto a neighboring lot. The broker fails to disclose this and does not request or examine the survey. Because this is a defect about the property itself (encroachment), the omission is material.
A home is located in a federally designated floodplain, but the listing agent fails to investigate or disclose that fact. The omission is material because flood risk is an external factor directly affecting the property.
After a buyer inspection reveals serious electrical/plumbing issues, a seller relists the home without updating disclosures and falsely attributes the prior buyer’s withdrawal to financing issues. That misrepresentation is material because the known defects should have been disclosed.
Even in cases where the seller answers “No Representation” in the RPOADS (Residential Property and Owners’ Association Disclosure Statement), a broker’s duty to disclose material facts still persists. The form’s limitations do not relieve an agent of independent disclosure obligations.
Why Materiality Remains Ambiguous (and How to Navigate It)
Because “material fact” must adapt to varying properties, buyer needs, and market contexts, no bright-line rule covers every situation. That ambiguity allows the Commission to evaluate each case against the “reasonableness standard.” In practice, what matters is whether a reasonably prudent broker in the same circumstances would have discovered and disclosed the fact.
When disputes arise, the Commission often analyzes:
What the licensee actually knew (from documents, communication, or inspections)
What the licensee should reasonably have known (what a prudent agent would have investigated)
Whether the fact was “common knowledge” (though even common knowledge does not excuse disclosure)
Thus, while you cannot predict every possible materiality question ahead of time, you can build defensibility by adopting reasonable investigation practices (visual inspections, public records review, asking probing questions) and documenting your due diligence steps.
Tips for Agents to Mitigate Risk
Err on the side of disclosure. If you’re uncertain whether something is material, disclose it (especially in writing).
Document your process. Keep records of inspections, questions asked, research, and decisions to disclose (or decline) particular facts.
Prompt disclosure. If you learn a material fact after contract formation, you must disclose it immediately — you can’t wait for someone to ask.
Tailor to the client. If a buyer has expressed particular priorities (quiet streets, flood safety, zoning), investigate those areas specifically.
Don’t hide behind the seller. Even if the seller resists or declines to provide information, the agent still has an independent disclosure duty.
Be cautious with “no representation.” Use of a “no representation” box in a disclosure form does not relieve a licensee from the duty to disclose known material facts.
If an agent faces an allegation of failing to disclose, the ambiguous nature of "material fact" means that the professional license defense lawyer’s role is crucial: to frame the omitted fact as less material (or showing the agent acted reasonably in investigation) and to show that the agent met the standard of care in the circumstances.
This is not legal advice. If you do need legal representation call the office at: 919-616-3317