New Jersey Real Estate Salesperson · Property Condition and Disclosures
Material Facts and Defects
On this page 6 sections
In 30 seconds
A material fact is any fact about the property that a reasonable person would weigh in deciding to buy, sell, or set a price, and a licensee must disclose every known material adverse fact to everyone in the deal. The tested distinction is patent defects, which are visible, versus latent defects, which are hidden.
Why this matters
Exam writers love a licensee who "did not want to scare the buyer," because hiding a known material fact is a license-losing act no matter whom the licensee represents.
The college version
In normal terms
- A material fact is information important enough to change a reasonable buyer's decision or price; a material adverse fact is one that hurts the property's value, safety, or usefulness.
- Patent defects are visible on a reasonable look; latent defects are hidden, so disclosure is the only way a buyer learns of them.
- A licensee must disclose what is known and what a reasonable visual inspection would reveal, must not hide anything, and must not dress up guesses as guarantees.
Concepts in this outline
- Definition of a material fact — information a reasonable person would consider important in deciding whether to buy, sell, or at what price; adverse material facts hurt value, safety, or use.
- Latent defects versus patent defects — latent defects are hidden from a reasonable visual inspection; patent defects are readily observable; both are material if a buyer would care.
- Licensee duty to disclose known material adverse facts — a licensee must reveal known material adverse facts to all parties, client or customer, and cannot hide them behind client confidentiality.
- Duty to investigate versus duty to disclose — a licensee must disclose what is known and what a reasonable visual look reveals, but is not required to inspect like a professional.
- Avoiding unsupported opinions and guarantees — statements about condition, remaining life, or safety must rest on facts or be referred to qualified experts, never offered as promises.
Eli explains
The same idea, in plain words
Explain it like I’m 10
Selling a bike with brakes you know are shot and saying nothing is a lie told with silence. Real estate has the same rule: disclose known material facts, meaning facts a sensible buyer would weigh in deciding to buy or what to pay. A material adverse fact is the bad kind, such as a leaking basement.
Defects come in two flavors. A patent defect is out in the open, such as a cracked step. A latent defect hides where a walk-through cannot find it, such as rot behind a wall. Both are material, but only latent defects depend on someone speaking up.
The licensee's duty has two edges. A licensee is not an inspector and need not open walls or test wells (see Topic 06). But a licensee must disclose what is known and what a reasonable visual inspection would reveal, to everyone in the deal. Confidentiality protects a client's secrets, never a property's defects. And a licensee never offers unsupported opinions or guarantees, such as promising a roof "has years left." Facts get disclosed; guesses go to an expert.
Worked example
Devon, a salesperson, lists a Cherry Hill colonial for the Okafors. During the walk-through, Ada Okafor mentions that the basement takes on water every March, then asks Devon to keep it quiet because the floor is freshly painted. Devon explains that seasonal flooding is a latent material adverse fact, and that he must disclose it to any buyer regardless of whom he represents. The dated gutter downspout dangling off the garage is a patent defect, so buyers will see it themselves, but Devon still notes it. When a buyer asks whether the furnace will "last another decade," Devon declines to guess and suggests a heating contractor. The sale closes without a lawsuit, because nothing was hidden and nothing was promised.
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