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California Real Estate NHD Law

Remember the story about Goldilocks and the Three Bears?  A young, and rather picky, lass wanders into the home of a family of bears who’ve just stepped out.  While making herself at home, she finds that this porridge is too hot, that porridge is too cold, but the other one is just right.  This chair is too big, that one is too small, but the other one is just right.  She goes upstairs and discovers that this bed is too soft, that one is too hard, but the other one is just right.  Compliance with legally required disclosures in California maybe somewhat similar to the choices Goldilocks finds in the home of the Three Bears. How you ask?

Disclosure for home sellers in California involves coming clean about any issue regarding the property that might adversely affect its value or desirability. The legal term for what home sellers must disclose is "material," as in "material facts" or "material defects." Material means that the particular fact or defect is significant enough to have affected whether you or someone else would purchase a property or the price paid.  Not enough disclosure is fodder for a lawsuit, but there is also such a thing as “too much disclosure”.   So what is  “not enough disclosure”, “too much disclosure” and “just right disclosure”?

The California Real Estate Natural Hazard Disclosure Law Civil Code

 

California Civil Code Section 1103 et seq. provides that the home seller and his agent have a legal obligation to make certain natural hazard zone disclosures.  This burden rests squarely on their shoulders and cannot be transferred to a third party such as an escrow agent.  The ultimate responsibility to choose “just enough disclosure” lies with the home seller and his agent.  So how does a home seller with no experience choose the right disclosure source?  That is where the experienced agent chooses the best NHD company for their client after due diligence.  Does giving the home seller three companies to choose from satisfy the due diligence and the agent’s fiduciary duty to her client? Possibly: If the agent could show that they did a thorough research of all three companies and that all three disclosed “just the right disclosure”.  Unfortunately, the natural hazard disclosure industry is unregulated, which means that there is no set standard, no over site and no consequences for bad reports. So all third party natural hazard disclosure reports will be different – some will have too much, and some will have not enough and maybe some will have just the right amount of disclosure.

Natural Hazard Zone Disclosure Report Cost | Saving Pennies to Lose Millions

 

This is where the home seller and his agent must act like Goldilocks.  Research what is required, consider companies that include ALL that is required and exclude companies that include information not required.  What are items that are considered ‘over disclosure’?  Some California natural hazard disclosure “low cost NHD” companies include items in their reports that are not legally required such as maps, proximity to gas lines, neighborhood blight, or permit reports.  These items are included to look complete and colorful but are actually detrimental to the entire report. Consider what might happen if the disclosure of certain non-required information cost, sale of a property?  For example, if a buyer backs out of a deal after he sees, on a non-required map in an NHD report, that the subject property is within 5-miles of a gas line that was disclosed (but not required to be disclosed) in the low-cost NHD, who will that home seller hold liable for their lost sale?

Property ID Corporation the Real Estate NHD Company

 

A responsible natural hazard disclosure company ensures that their Natural Hazard Disclosure Report complies with the law and protects brokerages and agents from lawsuits. The Property I.D. Corporation NHD Report is the report that is ‘just right’, which is guaranteed in writing.  Maybe that picky girl was on to something.


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