Did you know that California requires sellers to provide buyers a natural hazard disclosure report? Doesn’t seem that significant, simply more disclosures, right? However, it may have an impact on the selling. So, what exactly is this state-mandated report, and how does it affect you when buying or selling a home? 

With all the fires in the bay region, storms around the country, and earthquake predictions, it’s logical that the state requires a thorough disclosure of known environmental concerns that may influence your property because they are considered significant to the transaction.

What most people don’t know is how it could affect the home buying, selling or development process. Specifically, this report identifies many hazards such as Earthquake Faults, Seismic Hazards, Landslides, Liquefaction, Wildfires, Dam Failure, Flooding and Tsunami.

When the home is identified as in a high risk of any of these hazards it can not only affect the developer’s ability to build on the property and the buyer’s decision on whether to proceed to purchase the home, but it can raise challenges in insuring the property. Insurance companies reference these hazard reports and often either choose to not insure some properties in some areas or require additional insurance. It’s not a deal killer there are always solutions, but it is something buyers and sellers need to take into consideration.

For example, many in the bay area have purchased a second home in Lake Tahoe or surrounding Rural areas. Over the years due to the fires, insurance companies have stopped insuring homes in those areas or require significantly higher premiums.

On the peninsula there are many areas that are subject to a flood zone since the areas are too close or below sea level elevations. These residents often are required to purchase additional flood insurance in addition to their standard home hazards insurance. Should the insurer not offer flood insurance the National Flood Insurance Program does provide protection for property owners from potential losses with this federal flood insurance.

In San Francisco for example, many neighborhoods and residents are subject to the Liquefaction hazard (not to be confused with properties build on landfill). Liquefaction is type of loose soil below the ground surface that can lose its density and strength during severe earthquake shaking causing it to act more like a fluid. For example, I showed a property yesterday my buyer loves however it is in a liquefaction zone. Therefore, we had to discuss what this means, investigate the seismic retrofitting that the property has been through and the condition of the foundation. In fact, that was my inspiration for today’s episode.  In the case of liquefaction, to hedge the risk homeowners may consider additional seismic reinforcement of their property and may be limited in their insurance options. They may also consider purchasing Earthquake insurance in addition.

And of course, anyone who lives in California is aware of Earthquake Hazard but may not know how close they are to living on or near a fault line. Or whether the fault line is considered potentially active or hasn’t had any activity in past years and considered low risk.  Seismic Hazard is different than Earthquake hazard- it is the strength of the shaking that occurs in that geographic area and how the soil may amplify the seismic waves. Think of this as the intensity of the shaking.

California’s cities and counties recognize certain natural hazard threats when planning land-use within their jurisdictions- Like the state-level zones, these locally defined zones are regulatory in effect, as government building departments typically consider them when deciding to approve or deny a building permit. We all live here; we all know some of the hazards we are exposed to and still choose to be here. Being aware so you can hedge the risk and overcome buying, selling and developing challenges is important. Planning your monthly budget to cover hazards insurance or other additional insurance is equally important.

Who you work with matters, especially in navigating the nuisances the bay area presents.

If you are looking at the option of buying a home or  selling a home in the San Francisco or the Peninsula in the near future please reach out to us.