Property Conditions and Disclosures - Part 3 - Chapters 28-31

Question 1

Identify the various types of natural hazards which need to be disclosed as related to value and desirability

Answer 1

The existence of a hazard due to the geographic location of a property affects its desirability and thus its value to prospective buyers. A seller of property is to disclose any natural hazards affecting the property known to the seller, as well as those contained in public records to the buyer. Natural hazards are disclosed using the statutory Natural Hazard Disclosure Statement (NHD).

Sellers and sellers agents of any type of real estate are to disclose whether the property is located in a Natural Hazard location. Locations where property might be subject to Natural hazards include:

• special flood Hazard areas, federally designated areas with the letter ‘A’ or ‘V’
• potential flooding and inundation areas, due to if sudden or total dam failure occurs
• a very high fire hazard severity zone,
• a state fire responsibility area
• earthquake fault zones
• seismic hazard zones

NOTE - When prepared by an NHD expert, the NHD report needs to also note whether the listed property is located within 2 TWO MILES of an existing or proposed airport, an environmental Hazard Zone called an airport influence area or airport referral area.

The buyers occupancy of property within the influence of an airport facility may be affected by noise and restrictions, now and later, imposed on the buyers use as set by the airport land use Commission. Also the expert report is to note whether the property is located within the jurisdiction of the San Francisco Bay Conservation and Development Commission.

Question 2

Comply with mandated disclosures of natural hazards on all types of property

Answer 2

The Natural Hazard Disclosure (NHD) Statement discloses risks to life and property which exists in nature due to the properties location, risks known and readily available from the public records (planning department) and are unrelated to the risks of life and property from man-made physical and environmental conditions disclosed by a Transfer Disclosure Statement. The Natural Hazard Disclosure assist buyers to determine whether they are to buy the property, and if so on what price and on what terms.

Question 3

Avoid liability by the use of a natural hazard expert to investigate the public record for known hazards

Answer 3

To obtain the Natural Hazard information to disclose to prospective buyers, a seller and their agent consult publicly available records 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.

Question 4

Alquist-Priolo Maps

Answer 4

The ALQUIST-PRIOLO MAPS are maps which identify earthquake fault areas available from the State Mining and Geology Board and the City or County Planning Department.

Question 5

natural hazards

Answer 5

NATURAL HAZARDS are risks to life and property which exists in nature do to a property’s location. Natural hazards come with the location of a parcel of real estate, not with the man-made aspects of the property.

Question 6

restoration

Answer 6

RESTORATION is the return of funds and documents on a rescission of a purchase agreement sufficient to place the buyer and seller in the position they held before entering into the agreement.

Question 7

termination

Answer 7

TERMINATION is the cancellation of a transaction before escrow has closed.

Question 8

Advise Sellers and buyers on their respective responsibilities for removal of pests and needed repairs

Answer 8

Unlike a Transfer Disclosure Statement (TDS) or a Natural Hazard Disclosure (NHD), Structural Pest Control report (SPC) is not a legislatively mandated disclosure in a California real estate transaction. However, the existence of termites adversely affects the value of property. Thus, disclosure is compelled before the buyer sets the price and closing conditions in an offer submitted to the seller.

An SPC report prepared by a pest control operator discloses any active investigations, damage from pest infestations or conditions which may lead to infestations. Once a property has been cleared of all infestations and all repairs necessary to prevent infestations have been completed, a certificate of clearance is issued.

Pest Control reports are only required of US Department of Veterans Affairs (VA) and some federal housing Administration (FHA) transactions, such as where active infestation is observed.

Question 9

Explain the contents of consequences of information in a Structural Pest Control Report (SPC)

Answer 9

In the SPC report, the pest control operator separates their findings and recommendations into two categories:

• Section 1 items which include visible evidence of active infestations, infections, or
• Section 2 items with conditions deemed likely to lead to infestation or infection but where no visible evidence of infestation or infection was found.

A pest control certification is a statement by the SPC company indicating the property is free of infestation or infection in the visible and accessible areas of the home.

An inspection will cover all accessible areas to determine whether an active infestation or infection exist or if conditions which will likely lead to future infestations or infections exist. Inaccessible areas do not need to be covered in an inspection. An SPC company is required to prepare a notice of work completed and not completed for any work undertaken on a structure.

Question 10

Manage the role of an SPC provider in real estate transactoins

Answer 10

In a transparent real estate market, the report and clearance would be part of the marketing package given to any prospective buyer who seeks more information on the property. However, sellers occasionally pass on the opportunity to order an SPC report and clearance during the listing stage. When termites are later disclosed to the buyer after acceptance of an offer to purchase, no one wins.

Purchase agreements frequently include SPC Provisions in the terms of purchase or as a condition of financing. When a purchase agreement requires an SPC report, a copy of the SPC report must be delivered to the prospective buyer or buyers agents by the seller or the seller’s agent as soon as possible (ASAP). Contract Provisions in the purchase agreement allowing the seller to entirely avoid the cost of the termite clearance and repairs are not enforceable when known defects go undisclosed at the time the buyer goes under contract.

Question 11

certificate of clearance

Answer 11

A CERTIFICATE OF CLEARANCE is a document certifying a property has been cleared of all infestations and all repairs necessary to prevent infestations have been completed.

Question 12

inaccessible areas

Answer 12

INACCESSIBLE AREAS are areas of a structure which cannot be inspected without opening the structure or removing the objects blocking the opening, such as attics or areas without adequate crawl space, slab foundations without openings to plumbing, floors covered with carpet, wall interiors, locked storage areas.

Question 13

Pest Control Certification aka Termite Clearance

Answer 13

A PEST CONTROL CERTIFICATION is a certificate of clearance by the structural pest control company indicating the property is free of pest infestation or infection in the and accessible areas, commonly called a termite clearance.

Question 14

separated report

Answer 14

A SEPARATED REPORT is a report issued by a structural pest control company which is divided into Section 1 Items, noting active infestations, and Section 2 items, noting adverse conditions which may lead to an infestation.

Question 15

Structural Pest Control (SPC) report

Answer 15

A structural pest control report (SPC) is a report disclosing any active infestations, damage from infestations or conditions which may lead to infestations. A SPC report is also formerly known as the wood destroying pests and organisms inspection report.

Question 16

Identify man-made environmental hazards which exist on a property, such as asbestos-containing building materials, radon gas or smoke

Answer 16

Environmental hazards are noxious or annoying conditions which are man-made hazards, not natural hazards. As environmental hazards, the conditions are classified as either:

• injurious to the health of humans or
• interference with an individual’s sensitivities.

Environmental hazards located ON THE PROPERTY which pose a direct health threat on occupants include:

• asbestos containing building materials
• formaldehyde
• radon gas concentrations
• hazardous waste
• toxic mold
• smoke from the combustion of materials
• security bars which might interfere with an occupant ability to exit a room to avoid another Hazard and
• Lead

Note - A seller is NOT required to investigate or have a survey conducted to determine the existence of asbestos on the property.

NOTE - A seller has a NO duty to investigate whether their property contains toxic mold.

NOTE - Unless a seller agrees to eliminate any lead-based paint (LBP) hazards, the seller does not have a duty to clean up a hazard.

Question 17

Distinguish environmental hazards which exist off a property, such as military ordinance sites and airport influence areas

Answer 17

Environmental hazards located OFF THE PROPERTY, but which have an adverse effect on the use of the property due to noise, vibration, odors or some other ability to inflict harm include:

• Military Ordnance sites within 1 mile of the property
• Industrial Zoning in the neighborhood of the property
• Airport Influence areas established by local airport land commissions
• Ground Transportation Arteries which include train tracks and major highways in close proximity to the property.

Question 18

Advise on the effect an environmental hazard has on the value and desirability of a property

Answer 18

Environmental hazards are defects which, if known, are disclosed as material facts as the hazards might have an adverse effect on a property’s value and desirability. It might have an adverse effect on a prospective buyers decision to purchase the property, and on what terms.

Question 19

Apply the rules for disclosure of environmental hazards to prospective buyers

Answer 19

The seller’s agent must competently conduct a visual inspection of the property for environmental hazards before preparing the transfer disclosure statement and advise prospective buyers of their observations and knowledge about conditions which constitute environmental hazards. The notice of any environmental hazard, to be delivered to a buyer by a seller, is delivered in writing. The TDS and purchase agreement are currently used as a vehicles for written delivery.

Further, the seller’s agent delivers, or confirms the buyer’s agent has delivered a copy of the environmental hazard booklet approved by the California Department of Health and safety (DHS) to the buyer.

The seller has no obligation to hire an expert to investigate and report on weather any environmental hazard is present on or about the property. It is the sellers and the sellers agents knowledge about the property which is disclosed on the TDS report.

Question 20

carcinogen

Answer 20

A CARCINOGEN is a substance was causes cancer in human beings.

Question 21

environmental hazards

Answer 21

ENVIRONMENTAL HAZARDS are noxious or annoying man-made conditions which are injurious to health or interfere with an individuals sensitivities

Question 22

hazardous waste

Answer 22

HAZARDOUS WASTE is any product material or substance which is Toxic, Corrosive, Ignitable, or Reactive (TCIR).

Question 23

Use the federal lead-based paint (LBP) disclosure to timely disclose the existence of lead-based paint hazard on residential properties built prior to 1978

Answer 23

Lead-based paint, defined as any surface coating containing at least 1.0 mg per square centimeter of lead, or 0.5% lead by weight, was banned by the Federal Consumer Product Safety Commission in 1978. A Lead-Based Paint Hazard is any condition that causes exposure to lead from lead-contaminated dust, soil or paint which has deteriorated to the point of causing adverse human health effects.

An owner of residential property built prior to 1978 cooperates in the lead based paint (LBP) disclosure and their agents other marketing efforts by:

• filling out and signing the federal LBP DISCLOSURE FORM required on all pre 1978 residential construction
• filling out and signing the TDS containing the lead-based paint, environmental and other property conditions
• making a physical home inspection report available to prospective buyers as an attachment to the TDS form
• providing the seller’s agent with copies of any reports or documents containing information about lead-based paint or lead-based paint hazards on the property.

Question 24

Determine when to delivery the LBP disclosure to a buyer

Answer 24

A prospective buyer of a residence built prior to 1978 is put on notice of LBP conditions by handing them the disclosure forms before they make an offer. The disclosures advise them they have a 10-day period after their offer is accepted to evaluate the lead-based paint risks involved.

Question 25

Advise owners and buyers on the conditions of the LBP disclosure.

Answer 25

A prospective buyer of a residence built prior to 1978 is put on notice of lead-based paint LBP conditions by handing them the disclosure forms before they make an offer. The disclosures advise them they have a 10-day period after their offer is accepted to evaluate the lead-based paint risks involved. The buyer may agree to a lesser period of time or simply wave all their rights to the federally permitted risk evaluation period. However, disclosures about the single-family residence property cannot be waived by the use of an “as-is” sale provision or otherwise.

Exempt from the Federal LBP disclosures are foreclosure sales of residential property. Yet, a foreclosing lender still has a common law duty to disclose property defects known to them at the time of the Foreclosure sale.

Question 26

lead-based paint

Answer 26

LEAD BASED PAINT is any surface coating containing at least 1.0 mg per square centimeter of lead, or 0.5% lead by weight.

Question 27

lead-based paint hazard

Answer 27

A LEAD-BASED PAINT HAZARD is any condition that causes exposure to lead from lead-contaminated dust, soil or paint which has deteriorated to the point of causing adverse human health effects.