Nine-in-ten homebuyers weigh climate risks when choosing a home

Climate change can be an amorphous topic — something that will impact the next generation and will occur far from home. Right?

But for homebuyers pouring their incomes and lives’ savings into a long-term commitment, it’s a very real concern.

90% of homebuyers in the Western U.S. said at least one form of climate risk influenced where they shopped for a home, compared to the national average of 83%.

Of the homebuyers in the Western region surveyed:

• 45% said the potential for flooding changed where they looked to buy;
• 45% cited extreme temperatures;
• 43% cited wildfires;
• 40% cited hurricanes; and
• 35% cited drought, according to Zillow.

Higher risks of climate-related disaster naturally lead to higher insurance premiums, which translate to higher monthly costs for homeowners. Or — much worse — homeowners simply forego insurance to save money. For example, one-in-four homeowners who lost property during the devastating 2018 Camp Fire were uninsured.

As climate change continues to escalate with each passing year, California homeowners are uniquely situated to stand to lose property value due to both increasing wildfire risk, rising sea levels, inland flooding and the other effects of rising temperatures.

To help their homebuyer clients fully assess the risks, buyers agents need to demand detailed and complete Natural Hazard Disclosure (NHD) reports from sellers agents before looking further into any property.

Proper conduct, as legislatively intended, is for the sellers agent to obtain an NHD at the time they take a listing, before marketing the property. When a buyer or the buyers agent seeks more information on the property, the NHD and other disclosures are provided — ASAP, and always before the seller accepts an offer.

Disclosing natural hazards

Any property is subject to natural hazards, which may include:

• special flood hazard areas;
• potential flooding and inundation areas;
• severe fire hazard zones;
• wildfire areas;
• earthquake fault zones; and
• seismic hazard zones.

In California, the seller of any type of real estate needs to deliver the NHD report to a buyer at the start of negotiations, managed by the sellers agent.  This report is used to disclose any natural hazards known to the seller or their agent, including those available in public records. [See RPI Form 314; Calif. Civil Code §1103.1(b)]

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The existence of a hazard due to the geographic location of a property affects its desirability, and thus its value to prospective buyers — a material fact requiring disclosure before contracting. Hazards, by their nature, limit a buyer’s ability to develop the property, obtain insurance or receive disaster relief. As climate change makes natural disasters more frequent, the importance of disclosure is higher than ever.

The NHD report always needs to be given to the buyer prior to the seller’s acceptance of an offer. Upfront factual disclosures notify the buyer of any property conditions known to the seller or the seller’s agent. Without this information, a prudent buyer is unable to set a price and make an informed offer.

Negotiations with a prospective buyer trigger a full disclosure when the buyer or their agent seeks additional information beyond the data contained in any marketing materials.

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Amid climate change, agents find safety in complete disclosures

The NHD encourages brokers to use natural hazard experts to gather and report the information publicly available from the local planning department rather than do the work themselves. The use of an expert to gather information from the public record and prepare the report relieves the seller’s agent of any liability for errors not known to the agent to exist: risk mitigation through proper conduct.

The Authorization to Prepare Natural Hazard Disclosure is used by an agent to document the request for an inspection, ordered on behalf of the seller (or buyer). It authorizes an NHD expert to prepare an NHD report for disclosing property conditions to a buyer. [See RPI Form 131]