Is The Disclosure Source NHD Report Scaring My Buyer?

If you read our last post, it raised a lot of questions; so we started looking deeper. Disclosure Source reports come with a colorful map indicating the location of the property with an icon in the shape of a house. The map that I am looking at has a dimension of about four (4) square miles.

The map shows that the property I am researching is not in any hazard zone for Flood Hazards, Dam inundation, Very High Fire, Wild land Fire, Earthquake Fault, Seismic Hazard or Bodies of Water and Rivers. Sounds good, except that the Disclosure Source map shows a Flood Hazard Area, a Dam Inundation Area, and Bodies of Water and Rivers in close proximity to the location of the house.

We decided to investigate if there is a legal requirement for Disclosure Source to show whether the house is within a four square mile proximity to any hazards. The California Civil Code specifically reads: sellers and their agents must disclose if property is IN or NOT IN one of those hazard zones. Showing hazards within four square miles of the property is definitely not required.

California Civil Code Section 1103.2 and Civil Code Section 1103.7 specifically read: transferor(s) and their agent(s) acknowledge that they have exercised good faith in the selection of a third party report provider. Could an agent who refers his/her clients to an NHD report that exposes information not required by law and that negatively impacts the desirability and value of the property, and could ultimately scare the buyer away, be subject to a lawsuit from the seller?

Our conclusion: Exposing the proximity to hazards with a colorful map is unnecessary and a bad practice for real estate agents and sellers.

Please share with us your experiences with “the maps”. Your comments and suggestions are valuable to all our readers.

  • RE-Insider

    We got a great email from Ellen on this post. See the entirety of it below.

    Since the scale at the bottom of the map indicates it is 0.5 (1/2 mile), it looks to me like the inundation of the dam area is less than that. And, the river is approximately 1 mile away. And, the FEMA flood hazard area is less than that.

    Do you not think a buyer would want to know that, even if the state says it is not necessary to report it? My buyers would!

    It is up to the buyers to do all the investigation they want. I guess from now on as a buyer’s agent, I need to provide my own report to the buyers.

    Yes, I know that most buyers’ would know the river is that close. But, in the excitement of a new home the emotions run high, as the buyers’ agent, I need to keep cool, calm, and collected and give the buyers the information they need to make a wise decision. They need to be reminded that the river is close and the possibilities that may happen.

    Which company’s report have you found would be a good choice for me to use for buyers?

    This kind of reminds me of when I represent the seller and buyers’ agents want the seller to let the buyer put things in the house or on the property before escrow closes. I tell the seller. The seller asks me my opinion. I tell the seller, “You are responsible if anything happens to the items.” The seller then says “NO!”

    The latest information I have heard from the government is that they do not consider the big power lines a hazard. Some people don’t believe they are detrimental to one’s health, yet others think they are.

    As a buyers’ agent, I ask the buyer if they see the lines. Sometimes, buyers say, “What lines?’ They are not concerned. Yet, I always put on the Transfer Disclosure Report that they are there.

    I am waiting for your response.

    Ellen
    http://www.OasisRealtyNow.com

    • RE-Insider

      We agree that disclosure is a key part of any real estate transaction. Our concern is that the NHDS portion of a disclosure report is a legally defined document that should not be embellished by attaching a colorful map for marketing purposes. This can have negative consequences for both the buyer and the real estate agents.

      In the Disclosure Source report we previously talked about there were two maps provided that had conflicting information as to whether the property was in a very high fire hazard zone or not. This could only create confusion on the part of the buyer and cause the rest of the report to be called into question.

      On the real estate agents side if you order a report that contains a map with negative or confusing information outside the scope of what is required by law you run the risk of either devaluing or making the property harder to sell. Neither of these situations is going to make the seller happy. Given the fine line between legally required disclosure and over disclosure that real estate agents have to walk, it just makes good sense to use disclosure companies which follow the legal requirements as set by California civil code.