Misrepresentation and failing to disclose makes up approximately 70% of claims1 against real estate agents, and the average cost of settling claims is around $54,000 as of 2025, according to AXA XL. In addition to these financial losses, severe reputation damage can occur if you purposefully or negligently exaggerate, misrepresent, or conceal pertinent facts about a property or transaction. It’s vital that real estate agents understand what pertinent facts are, in addition to honoring the Code of Ethics and both state and federal laws to avoid claims.
What Are Pertinent Facts?
The National Association of REALTORS® (NAR) does not provide a standard, straightforward definition of “pertinent facts.” Instead, real estate agents are expected to use both reasonableness and common sense when determining if facts are pertinent, in addition to honoring federal and state laws when applicable.
In general, real estate agents should consider whether or not disclosure of a fact will have an effect on the decision-making process of a reasonable purchaser, the overall appeal of the property, the price a purchaser might pay, and the potential ability to resell the property in the future. If the answer is yes, then the fact is likely pertinent to the property or transaction, and it should be disclosed.
Additional factors and considerations when determining how pertinent a fact is include:
- Time: Certain facts, such as a death in the home, can lose pertinence over time. For example, a murder that occurred on a property a year ago is likely much more pertinent to a potential buyer than one that occurred 100 years ago.
- Habitability: Usually, if a fact affects the ability of a potential purchaser to live on the property, it is a pertinent fact. This includes information such as previous pest infestations, mold issues, heating and air conditioning issues, and water or sewer issues.2
- Desirability: Even if a fact doesn’t affect how habitable a property is, it could affect how desirable a property is. For example, proximity to construction that is expected to be long-lasting might influence how the potential purchaser feels about their decision to buy a property.
Honoring the Code of Ethics
Real estate agents must note that when there are no laws requiring them to disclose certain information about a property, or when there is no “express or implied duty”3 to discover and disclose pertinent facts, the agents should adhere to the NAR’s Code of Ethics.
The Code of Ethics prohibits real estate agents from the following:
- Exaggerating the benefits or features of a property
- Misrepresenting the condition or details of a property or transaction
- Concealing pertinent facts related to a property or transaction
That being said, when a legal prohibition is in place, such as state law prohibiting the disclosure of a previous tenant’s sensitive information, the Code of Ethics is secondary to the law. Real estate agents must adhere to state and federal laws first, and, if there are no applicable laws in place, the Code of Ethics second.
Protecting Yourself from Claims
Proper disclosure of pertinent facts is something that all real estate agents should strive for, as exaggerating, misrepresenting, or concealing these pertinent facts can result in serious consequences. In addition to legal claims and financial loss, not adhering to state or federal laws and the NAR’s Code of Ethics can be a damaging blow to a real estate agent’s career.
Real estate agents should do their best to understand and discover all pertinent facts about a property or transaction in order to mitigate the risk of claims. Professional liability insurance can also help real estate agents protect themselves in case the worst happens and a claim is filed.
Pearl Insurance is committed to helping you manage your risk. Our carrier, AXA XL, rated A+ (Superior) on AM Best, has been partnering with Pearl for 20 years, providing you with the best E&O protection. If you have questions about E&O insurance or the claims process, schedule a time to talk to our experts.
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1“Misrepresentation of Property is the Top Claim Filed Against Realtors®” Pennsylvania Association of Realtors, 2022.
2”What Makes a Rental Property Habitable?” Realty Boulevard, 2024.
3“Part 4, Appendix II — Appropriate Interpretation of “Pertinent Facts” as Used in Article 2 of the Code of Ethics. NAR, 2026.
