Where this fits on the exam
| Official syllabus topic | Property Disclosures: Material Facts, Adverse Conditions, and Licensee Duties |
|---|---|
| Official PSI area | Property Disclosures |
| Published weight | 7% of the national portion |
| Source edition | PSI Georgia Candidate Information Bulletin dated July 1, 2026 |
The Rule
PSI publishes a weight for the complete official area, not a guaranteed count for this individual comparison. Use the source, document, actor, event, and timing stated in the question before applying a memorized definition.
Side-by-side comparison
Read across each row. The terms are deliberately compared on identical dimensions so the difference remains clear when the exam hides the vocabulary inside a scenario.
| Decision dimension | Material fact | Material defect |
|---|---|---|
| Scope | Information important enough to affect a reasonable transaction decision | Adverse physical or legal condition affecting property or its use |
| Relationship | Can concern property, transaction, parties, title, use, or another relevant matter | Can be a material fact, but not every material fact is a physical defect |
| Example | A pending zoning action materially affecting intended use | Known hidden structural movement |
| Disclosure analysis | Depends on law, role, knowledge, contract, and discoverability | Depends on the same factors plus the condition and inspection facts |
Decision rule
Georgia-specific distinction
Worked example
Scenario. A listing broker actually knows that a concealed foundation failure affects safe occupancy and could not be discovered by a reasonably diligent buyer inspection.
Reason it through. The structural condition is a defect, and its severity makes it a material fact. Actual knowledge and hidden nature activate the disclosure analysis.
Answer. Treat it as a material defect and material fact subject to the applicable Georgia disclosure duty.
Common exam traps
- Using material fact and defect as exact synonyms
- Assuming only physical facts can be material
- Ignoring actual knowledge
- Assuming a buyer inspection automatically erases every disclosure duty
Original practice questions with detailed explanations
These are original instructional questions mapped to the July 1, 2026 PSI outline. They are not copied from PSI or any live examination. Choose an answer before opening the explanation.
Question 1A county has scheduled a hearing on a rezoning that would bar the home business a buyer plans to run from a listed house. The house itself has no physical problems. How should the rezoning information be classified?
- A. A material fact that is not a physical defect
- B. A material defect in the property's physical condition
- C. An immaterial fact, since it involves no physical condition
- D. An immaterial fact, since it concerns only the buyer's plans
Show answer and explanation →
Answer: A. A material fact that is not a physical defect
A material fact is any information important enough to affect a reasonable person's decision, and a pending zoning action that would block the intended use qualifies. It is not a physical defect, which shows the two terms are not synonyms. The plausible error is assuming only physical conditions can be material.
- A. Correct. A pending zoning change affecting the intended home business can influence a reasonable transaction decision even without physical damage.
- B. Incorrect. The hearing concerns permitted use, not a broken or damaged part of the building. Material facts extend beyond physical defects.
- C. Incorrect. Physical condition is not the only source of material information. A use restriction can matter substantially to the purchase.
- D. Incorrect. A proposed use can be central to the buyer's decision. The absence of structural damage does not make the zoning information immaterial.
Question 2A listing broker actually knows that a house has a concealed foundation failure that affects safe occupancy and could not be discovered by a reasonably diligent buyer inspection. The seller tells the broker to say nothing. What does Georgia's brokerage law require?
- A. Keep the condition confidential as the seller's information
- B. Disclose the known hidden condition to prospective buyers
- C. Say nothing, since buyers are expected to hire inspectors
- D. Disclose the condition only if a buyer asks about it
Show answer and explanation →
Answer: B. Disclose the known hidden condition to prospective buyers
Under BRRETA, a seller's broker must disclose adverse physical conditions the broker actually knows about that a reasonably diligent inspection would not reveal. A concealed foundation failure the broker knows about fits that duty, and the seller's instruction cannot override it. Confidentiality is the wrong choice, but it does not cover known hidden physical defects.
- A. Incorrect. A seller cannot instruct the broker to suppress a disclosure required by law. Confidentiality does not override that duty.
- B. Correct. The broker actually knows of the adverse foundation condition and the stated diligent inspection cannot reveal it. Those facts trigger the seller broker's disclosure duty.
- C. Incorrect. An inspection opportunity is not a substitute for disclosure of qualifying actually known adverse facts that diligent inspection would miss.
- D. Incorrect. The required disclosure is not conditioned on a buyer asking about the foundation. The broker's actual knowledge and the statutory facts control.
Question 3After closing, a buyer finds rotted subflooring hidden under carpet. Nothing shows the seller's broker ever knew about it. What is the broker's strongest answer to a claim of nondisclosure?
- A. The buyer had the chance to order a home inspection
- B. Rotted subflooring is a defect rather than a material fact
- C. The broker had no actual knowledge of the condition
- D. The seller never asked the broker to disclose anything
Show answer and explanation →
Answer: C. The broker had no actual knowledge of the condition
The specific BRRETA disclosure duty tested here concerns qualifying adverse facts actually known to the seller's broker. On the stated facts, lack of actual knowledge is the relevant answer. This does not excuse a false statement or remove other applicable duties of care. An inspection opportunity alone would not erase a duty to disclose a qualifying known hidden condition.
- A. Incorrect. The opportunity to inspect alone does not resolve a broker's duty concerning an actually known hidden condition. The knowledge facts still matter.
- B. Incorrect. A defect can also be a material fact. Rotted subflooring is not excluded from materiality merely because it is a physical condition.
- C. Correct. The specific disclosure duty here concerns actually known qualifying adverse facts. The absence of actual knowledge is the relevant answer on these limited facts.
- D. Incorrect. The seller's instructions do not determine the broker's statutory duties. A required disclosure would apply regardless of a request.
Ready to move on?
You have this distinction down when all of these are true.
- Define every compared term without using the other term as the definition.
- Rebuild the comparison table from memory.
- State the decision rule and Georgia distinction without notes.
- Solve the worked example after changing one key fact.
- Explain the rule or fact that makes each distractor wrong.
- Answer all three original questions correctly in mixed practice on a later day.
Recommended next lesson
Continue with Latent Defect Versus Patent Defect. Next, latent versus patent defect separates conditions a reasonable inspection would not reveal from those open to view, which is the discoverability question that shapes the disclosure duty covered here.
Return to the complete exam-concept library or the Property Disclosures hub.