A property in California is located in a designated Alquist-Priolo Earthquake Fault Zone. The seller must provide a Natural Hazard Disclosure (NHD) report to the buyer under California Civil Code §1103. How does this disclosure requirement affect property values?
Correct Answer
B) It may reduce value because the disclosure makes the specific fault zone risk explicit, and the designation may restrict certain types of construction
The Alquist-Priolo Earthquake Fault Zoning Act (Public Resources Code §2621 et seq.) identifies areas near known active faults. Properties in these zones face mandatory disclosure and may have construction restrictions (prohibiting structures for human occupancy directly over the fault trace). The explicit disclosure of fault zone status makes the risk tangible to buyers, who may reduce their offers accordingly. The construction restrictions also limit development potential.
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Related Concepts
TILA is a federal law that requires lenders to disclose the true cost of credit to borrowers, including the annual percentage rate (APR), total finance charges, and loan terms. It is implemented by Regulation Z.
A trustee sale is a type of foreclosure where a trustee, appointed under a deed of trust, sells the property at auction to satisfy the debt.
Usury is the practice of charging an interest rate that exceeds the maximum rate permitted by state law. Usury laws protect borrowers from excessive interest charges on loans.
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- → Compared to other appraisal factors, appraisers generally find the the most difficult calculation to measure precisely.
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