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

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.

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 an essential part of the California home buying process. California Law requires home sellers to provide the document as part of the 1998 Natural Hazard Disclosure Act.

In California, this report discloses if a home is:

• In an area prone to floods
• Rests on an earthquake fault line
• In an area likely to be hit with fires and wildfires
• At risk of a dam breach
• In a seismic hazard zone

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 that could make insuring a home more expensive or living in it riskier, like a home in an airport influence area.

When you’re selling, your listing real estate agent will usually order your NHD report from a third-party company before the completion of the sale or at escrow. The report will typically cost home sellers $50 – $150, depending on its length.

Once buyers get the NHD form, they can review the document – and if they decide to buy the house, they must sign the Natural Hazard Disclosure Statement.

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.

This report also informs homeowners on property taxes, special assessments, homeowners insurance cost or the need to purchase additional hazard insurance to protect their homes.

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. 

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. Your agent should know what disclosure forms are required in your state.

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 where a home 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. 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 also 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. For homeowners in an earthquake fault zone, earthquake insurance can provide coverage in addition to standard insurance.

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.

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 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.

No matter where you’re looking to buy or sell a home, you’ll want to learn about Seller’s Disclosures and how they can impact real estate transactions.