Pros and Cons of Offering a Natural Hazard Disclosure Report
In some states a natural hazard disclosure report is mandatory. This report is one that informs a prospective buyer, tenant or investor or any natural hazards that affected a home within the last 3-5 years. It will alert them to any future risks based on the home’s history.
There are some pros and cons to offering a full report. They are outlined below.
Avoid Legal Backlash
Someone who rented or purchased your home could file a suit against you if you knew about the hazard and did not disclose it. It is important to tell the buyer or renter about the problems in the report to avoid legal backlash which could cost you thousands of dollars afterward. They’ll need to sign off that they understand the risks, if they decide to proceed with the sale. The fact that you disclosed the hazards and received acknowledgement that the buyer understands the risks will free you from any legal responsibility.
Start Afresh In A New Home
A disclosure report will give you peace of mind if you decide to sell the property and move on to something new. The buyers, once informed cannot hold you morally responsible if you have disclosed problems that you’ve had with the property. If you want to move away from the problems with the home and neighborhood you can do so with a free mind having passed the problems on to someone else who might be willing to address them.
You’ll Lose Money When You Make A Sale
There’s nothing like admitting that there’s problem with a property before you sell it to make you lose money. People who are willing to purchase or rent the property in spite of the problems will want you to lower the price before they close the sale. In some cases, you’ll end of selling for a lot less than you paid just because of what you disclose in the natural hazard disclosure report. If buyers are wary of purchasing a home with potential problems the home will stay on your hands for a longer period.
The upside to this loss of money, if you can believe there’s one, is that you won’t have to face legal consequences later on. Therefore, that loss of money could potentially save you money in the long run.
You’ll see that there are some benefits and downsides to offering a natural hazard disclosure reports. Although the downside might seem like a major setback and cause you to hold on to the problem a lot longer than you’ll want to, it is always better to disclose the potential problems because it will save you more money in the long run.
California has a standardized reporting format it requires Seller, as transferor, Seller’s Agent(s), and Buyer, as transferee to sign one copy of the Natural Hazard Disclosure Report prior to the close of escrow.