5 of the Most Commonly Asked Questions (and Answers) About NHD Reports

Written by Will Caldwell

California has a combination of beaches, mountains, and world-class cities that are hard to beat, and many of its 39 million residents find the state difficult to leave. The Golden State has one of the hottest markets around right now, the average price of a home sits at $717,854, which is about a 22 percent increase since last year.

The value of Californian houses has been on an upswing for years, and it seems unlikely to change in the foreseeable future in such an attractive market.

However, there are some very real risks for homeowners living in California, as it is well known to be one of the most consistently hard-hit states by natural disasters. Since 1953 the state has experienced 315 major disasters, the most common being wildfires and floods.

Due to all this activity, the state in 1998 made a natural hazard disclosure Report (NHD report for short) a required document for sellers to provide buyers. This ensures buyers are aware of the risks of the area and are properly prepared to protect themselves against them.

Still, there are plenty of questions surrounding NHD reports, and it’s not an area a buyer or seller can afford to overlook during the sale process. By understanding what the report means and how to respond to its content, both the buyer and seller become fully protected in both the legal and physical sense.

1. Why Do NHD Reports Matter?

NHD reports matter for buyers as there’s no better single source of information about what life in the home will look like in terms of annual natural risks.

They outline not only the common Californian disasters you’d imagine like earthquakes or wildfires but also cover quality of life issues like military ordinance usage or airport proximity. For those looking to make what is most likely the largest purchase of their life, these factors matter and need to be weighed in before the final decision.

An NHD report is required first and foremost for the safety of the resident, but also as a legal shield for the seller. Without one both parties are vulnerable, the buyer to natural disasters, the seller to legal consequences if they fail to disclose a potential risk.

Yet it is neither who actually has a hand in the creation of the NHD report, as this responsibility is handled by a trusted and experienced third party.

2. Who Creates an NHD Report?

Providing an NHD report is mandated by the state of California, but it is up to the seller to commission the service from the experts. There are plenty of options out there, but for such an important aspect of a sale, it’s best to go with those who intimately know the details of the state and industry. 

We provide comprehensive reports in a timely fashion, and all our work is fully insured by E&O Insurance that safeguards all the involved parties. Having these extra certifications mean peace of mind for both sides, and you really can’t put a price on safety with such a major life step like homeownership.

These reports aren’t drowned in legal jargon either and are most are as short as a few pages. Finding the right third party to create your NHD report will not only ensure the sale itself is legal, but that both the buyer and seller can move with confidence and trust that they know all the circumstances surrounding a property.

3. When Should I Receive an NHD Report?

The seller of a home must share the NHD report with the buyer before the sale is complete, as the transaction cannot be legally closed prior to the buyer becoming aware of the report’s content.

There is a three-day window after the report is disclosed for the buyer to either commit or cancel to the sale. If the hazards disclosed are not what the buyer expected, or the risks are higher than what they are comfortable living with, then they are legally entitled to fully regain any deposits made without penalty.

It’s a critical junction point for both parties, but the timing of the NHD report is essential so that all involved are on the same page before any documents are signed and finalized.

4. What Kind of Information Do NHD Reports Contain?

The highlights of the report are the natural hazard designations of the area within which the home is located. These primarily deal with the most pressing concerns of the area, risks and damages associated with wildfires, floods and earthquakes.

The NHD report lets a buyer know the likelihood that their potential home will be affected by these disasters, and if there are any unique taxation policies for the area.

These factors might tip the scales for some, and it’s important to leave room in their purchasing plan for these potential risks and costs. The information of an NHD report is a sober analysis of the home’s safety and what the realistic cost of living in the area will be for the new owner.

5. How Can Best Use the Information On My NHD Report?

Once you know the risks of the home, you can then more accurately gauge its value and act to mitigate the risk. This sometimes takes the form of an extended insurance policy, but other means such as a flash-flood safety plan can be handled internally by the family of the buyer.

For the quality of life and tax side of things, it’s up to the buyer to decide if the costs revealed by the NHD report make the home still feasible for them.

At the end of the day, the NHD report is an important crossroads for a buyer to decide if the home is worth the natural risks and financial cost. It’s statistically unlikely that many of the disasters will ever come to actually pass, but it’s important to be aware and protected from them all the same.

The natural hazard disclosure report provides information for buyers and protections for sellers alike and serves as an important last step in the sales process. The whole process doesn’t require much in terms of financial cost or time, and after it’s complete buyers can then focus on soaking up the sun and enjoying all the fun that’s so common in California.