Colorful house boats floating on water in Sausalito

Natural Hazard Disclosure Report (NHD): What Is It And What Does It Cover?

Dan Rafter5-minute read

May 20, 2021

Share:

Selling a home in California? You’re required to provide your buyers with a Natural Hazard Disclosure report, better known as an NHD.

Sellers are required to provide this report so that buyers understand when they are considering a home that might be at risk of wildfires, floods or earthquakes.

What does an NHD report include? And what impact might it have on your home sale? The goal is to make sure that you’re informing buyers of the special risks that come with your home. If you tell buyers that your home sits in a part of the state prone to wildfires, you won’t have to worry about those buyers suing you should a blaze destroy their home.

What Is The Natural Hazard Disclosure Report?

A natural hazard zone is an area where homes face a greater risk for damage or destruction from natural disasters such as earthquakes, floods, landslides and wildfires.

The Natural Hazard Disclosure report is a document you'll need to include if you’re selling a home in California. It’s required as part of California's 1998 Natural Hazard Disclosure Act.

In California, this report discloses if a home sits in an area prone to floods, rests on an earthquake fault line or is in an area likely to be hit with fires and wildfires. The report also states if a home sits in an area that would be flooded if a dam fails or is located in a seismic hazard zone.

But that’s just a small part of what NHD reports typically cover. An NHD often runs more than 40 pages. And these reports, in addition to the main natural disasters, also disclose if a home is impacted by a wide variety of more minor additional potential hazards.

If a home sits near an airport and the noise from it might cause disturbances, the NHD can include that information. If there is likely to be radon gas in a home, the report might include that information. Anything that could make insuring a home more expensive or living in it riskier could be included in the report.

The reason for the report is that buyers need to understand the risks of buying a home in these areas. They also need to know that their homeowners insurance might cost more and that they might need to purchase additional types of insurance to protect their new homes.

When you're selling, your listing real estate agent will usually order your NHD report from a third-party company. There are several based in California. The report will typically cost home sellers $50 – $150 depending on its length.

Once buyers get the NHD form, they have 3 days to review the document and decide whether they still want to buy the home.

Neighborhood trends at your fingertips.

Check your local market.

Why Do You Need An NHD Report?

An NHD report is your chance to inform buyers of the risks involved in purchasing your home. If you disclose that your home sits in an area prone to earthquakes or wildfires, for instance, you won’t be liable should a buyer purchase your home and see it destroyed by an earthquake or engulfed by a wildfire.

You’ll also be purchasing your NHD from a third party, which offers you protection from potential lawsuits in the future. If the NHD contains incorrect information – maybe it falsely claims that your home doesn’t sit in a floodplain when it actually does – the legal liability will be on the company that prepared the report, not on you.  

Which States Require An NHD?

California is the only state that requires an NHD report. But that doesn’t mean you won’t have to include disclosures when selling a home in other states. Many states, for instance, require that you include a disclosure if your home’s walls have lead paint. Others might require that you disclose if your home’s basement floods or if your home has had termites or mold damage.

It’s important to discuss required disclosure forms with your real estate agent. This agent should know what disclosure forms are required in your state.

What Should Be Included In The Report?

An NHD always asks homeowners to disclose if their home might be impacted by six main potential hazards. Sellers check boxes for whichever of these hazards presents a risk for the California home they are selling.

Special Flood Hazard Area

Homeowners must indicate whether the home they are selling sits in a Special Flood Hazard Area, an area that has a high risk for flooding. Buyers, if they see this box checked, can explore additional insurance to protect themselves financially from future floods. Typically, this means paying extra for flood insurance.

Dam Inundation Zone

The NHD also requires sellers to indicate whether their residence sits in a Dam Inundation Zone. This is an area downstream from a dam that would flood if it suffered a breach or if there was an uncontrolled release of water from the structure. Again, this gives your buyers the chance to consider investing in flood insurance to protect themselves.

Very High Fire Hazard Zone

Another risky location covered in the NHD is the Very High Fire Hazard Zone, an area where fires when they do happen are more likely to be dangerous and destructive. Buyers need to know when the home they are purchasing sits in this type of area because standard homeowners' insurance policies might not provide the depth of coverage they need. Instead, buyers might need to purchase high-risk fire insurance through what is known as a California FAIR (Fair Access to Insurance Requirements) Plan. Buyers might also explore taking out additional policies from private insurers willing to cover homes in these hazard zones.

Wildland Hazard Fire Zone

Sellers must also disclose whether their home is in a wildland area that might be at substantial risk for forest fires. Again, it's important for buyers to understand this risk. The NHD states that it is not the state of California's responsibility to provide fire protection services to any building within a wildlands area, unless the Department of Forestry and Fire Protection has reached an agreement with a local agency to provide this protection. The NHD states that buyers must take precautions against forest fires, including removing dead leaves and debris that can easily ignite.

Earthquake Fault Zone 

Earthquakes are a concern in California. That’s why the NHD requires that sellers disclose if their homes sit in an earthquake fault zone. Fault zones are fractures between two blocks of rock. These fault zones can move farther apart during an earthquake or creep slowly apart over time. Both of these fault zone movements can cause damage to a home.

Seismic Hazard

NHD reports also require sellers to disclose whether their residences sit in an area prone to earthquakes. Most homeowners’ insurance policies don’t provide enough financial coverage if your home is damaged or destroyed by an earthquake. If you do buy a home in a seismic hazard zone, you should explore earthquake insurance.

Additional Hazard Zones

Even if you’re not in California, you can’t expect to sell a home without providing buyers with disclosure documents. Depending on where you live, you might have to disclose:

  • whether your home sits in an area prone to hurricanes.
  • if tornadoes are a possibility.
  • if your home is in a part of the country where there can be volcanic eruptions.
  • if the presence of radon gas is a possibility.
  • if the noise from a nearby airport might cause regular disturbances.
  • if your home sits within a mile of a site in which the U.S. military tested explosive munitions.

The Bottom Line: The NHD Report Can Save Both The Seller And Buyer

The NHD report is an important part of any home sale in California. The report can save buyers from taking on more risk than they are comfortable tackling and can help them avoid buying a home that requires expensive insurance. The NHD’s disclosures also protect sellers from lawsuits from angry buyers who might otherwise not have realized that they were buying in a flood zone, area prone to earthquakes or part of the state in which forest fires are common.

If you’re ready to sell or buy a home, make sure to read up on hazard insurance. Doing so could save you plenty of future financial pain.

Get approved to refinance.

See expert-recommended refinance options and customize them to fit your budget.

See What You Qualify For

Dan Rafter

Dan Rafter has been writing about personal finance for more than 15 years. He's written for publications ranging from the Chicago Tribune and Washington Post to Wise Bread, QuickenLoans.com and RocketHQ.com.