It won’t have escaped your notice that there is a significant amount of paperwork involved with selling your home. Even before you get to the point of contracts being exchanged, there are various reports that you need to arrange. The title survey and property inspection are elements even most inexperienced sellers will be familiar with. However, some properties require more documentation.
One item you may find you need is a natural hazard disclosure report. This is especially common if you’re selling a home in a vulnerable area, such as on the coast or in a location frequented by strong storms. Unfortunately, this represents not only additional paperwork, but extra costs.
Naturally, you want to keep your outlay low, so it’s worth looking further into who pays for a natural hazard disclosure report.
So, who pays for a natural hazard disclosure report? In most instances, the seller will be the party paying for the report. This is particularly the case if you’re selling independently via the multiple listing service (MLS). The seller does, after all, have the duty of disclosure.
However, as with so many aspects of home sales, there are exceptions. In some circumstances, a professional collaborator — such as a realtor or broker — may arrange for the report. There can also be times the buyer might either pay for it in full or in part. We’ll explore some of these elements further so you can make more informed decisions about how the report fits into your selling strategy.
What is a Natural Hazard Disclosure Report?
A natural hazard disclosure report is a document that fully outlines the risks a property is likely to be subjected to as a result of the surrounding environment. These types of reports are particularly common and important for properties in areas that regularly experience wildfires, floods, landslides, avalanches, coastal erosion, and earthquakes, among others. Particularly if you’re selling property on Florida’s coasts, you may already be familiar with the variety of issues your property is subjected to by the ocean and the extreme weather conditions.
The intention is to give potential buyers the data they need to make an informed decision. This isn’t just about whether to purchase a property, but also so they understand the challenges they may face in the long term.
These reports tend to be thorough and it is not unusual for natural hazard disclosure reports to be upwards of 40 pages long. This is understandable, as people buying a property in vulnerable areas could wind up paying for damage repairs and precautionary measures. Not to mention that the property insurance premiums may need to be higher.
Why do Sellers Pay for the Report?
Primarily, as a seller, you want to avoid potential litigation as a result of undisclosed risks. Florida legislation requires that if a seller knows of any material facts affecting the value of the property that are not readily observable, they have a duty to disclose them to the buyer. This is open to interpretation to an extent, but it can certainly be argued that natural hazards fall into the category of material facts about a property that aren’t readily observable. Therefore, if a buyer isn’t informed sufficiently of the natural hazards, you may find yourself on the wrong end of a lawsuit. Therefore, you are paying for the report as a form of protection.
Sellers also have an ethical duty of disclosure. The last thing you want is to put buyers at physical or financial risk because you or they didn’t know enough about the natural hazards the property could be subjected to. Paying for a report requires a relatively small effort and outlay on your part. From there, the buyer is able to make informed decisions, and you know you’ve maintained high ethical principles.
When Might a Buyer Pay for the Report?
Though relatively rare, there are some instances in which the buyer might pay for the natural hazard disclosure report. Mostly, this occurs when a seller isn’t necessarily obligated to provide a report, but the buyer is compelled by another party to obtain this information. For instance, a mortgage lender may require a full report before agreeing to provide funds, or a mortgage insurance company may need more information before covering a purchase.
In some instances, a buyer may agree to pay for the report alongside other costs as part of the negotiation of the sale. While you or your MLS broker may obtain the report initially, the agreement could be to add these elements to the final price of the sale. Generally, though, this is applicable to properties that receive a lot of interest and the buyer is keen to secure the sale.
Can You Avoid Getting a Natural Hazard Disclosure Report?
Any seller is acutely aware of the outlay they’ll be making when putting their home on the market. You may have decided to utilize a flat fee MLS broker because you want to minimize any unnecessary realtor fees related to the sales process. So, it’s only natural that you’d consider whether paying for a natural hazard disclosure report is a strictly necessary expense.
At the moment, Florida law doesn’t expressly detail that a natural hazard disclosure report needs to be provided. While this may seem like a technical way to avoid paying for a report, it’s important to remember that sellers are compelled by other legal requirements to disclose material facts. The types of hazard disclosures sellers in Florida must make buyers aware of are quite extensive, and tend to include some of those that are included on natural hazard disclosure reports. Therefore, neglecting to get a report for a property you’re relatively certain could be subject to natural hazards is a risky endeavor.
If you’re uncertain whether you require a report or can avoid getting one, it’s best to speak to a real estate attorney or a qualified and knowledgeable real estate broker.
Can You Minimize the Costs Involved?
Avoiding getting a report isn’t generally advisable and could be considered unethical. Nevertheless, there are some ways you may be able to minimize the costs you pay for a natural hazard disclosure report.
Primarily, speak to your broker or real estate agent. Particularly if they have been operating in the local area for some time, they may have good relationships with third-party companies that specialize in these documents. As a result, they may be able to help you obtain a better price for the report to be compiled or offer it as a lower cost option as part of your flat fee MLS package.
Alternatively, you may be able to negotiate to at least split the cost of the report with buyers. This can be relevant when you’re keen to sell to a specific buyer but they also have requests from their mortgage broker or insurer in relation to the report. In this instance, agreeing to share the costs is mutually beneficial.
In most cases, the party who pays for a natural hazard disclosure report is the seller. This is largely due to the legal and ethical duties of disclosure a seller must maintain. There are some circumstances in which the buyer may be more inclined to may for the report, but this is relatively uncommon. Rather than try and avoid getting a report and risking the consequences, you might be able to get a lower priced report by collaborating with a real estate broker. In either case, it’s always in your best interest to ensure buyers receive full disclosures about risks involved with the property.
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