JCP Reports - Explaining Geologic Risk to Buyers

Explaining Geologic Risk to Buyers

By JCP Geologists

Uncertainty is probably one of the most difficult factors for the real estate agent to deal with when conveying geologic disclosure information to potential buyers. Buyers want assurances that the property they are interested in is "safe" relative to their acceptable levels of risk.

It is very important to help buyers understand that geologic disclosure is simply a means of conveying information about a property. In most cases, the information being disclosed is put in terms of being a "potential" hazard. In these cases, it cannot be construed that the hazard is imminent or even probable. A "potential geologic hazard" just means that the risk being addressed is relatively higher in the delineated area than other areas. For example, there is a higher risk of slope stability problems in mountainous areas than on lowland properties.

It is also important to make buyers and sellers understand that geologic hazard information is not presented with the intent to frighten anyone or lower property values. In most cases, the information points the way to a potential solution. The solution can be in the engineering of a structure or perhaps insurance such as in the case of flood hazard.

It is also prudent to not explain geologic risk from the real estate licensee's personal perspective or opinion. Let the buyer decide for himself or herself. Beware of comparisons too. How many times have such comparisons as "It's safer to live near a fault than to drive the freeways" been made? Depending on the buyer's perspective of earthquakes, it may just make them quit driving the freeways! It won't necessarily make the buyer feel any better.

Some buyers do not weigh risk based on the probability that a disasterous event will or will not occur, but merely on their choice of whether to take on the risk, and how much control they feel they have over that risk. A buyer's feeling about the "control" he has over any particular risk can depend on the type of hazard being disclosed. For example, earthquake risk may be viewed differently from other geologic hazards because there is little control over such events (except perhaps for insurance). Disclosure of a landslide, however, may be viewed differently because there is some "control" through repair and mitigation. All of this is dependent on the individual buyer's perspective.

There are ways to present geologic risk that may help buyers understand or put the information in better perspective. For instance, buyers may understand risk better when placed in terms of percent. Percent is a measure of confidence or probability. For example, "only approximately 15% of the properties that are within a 'moderate landslide potential area' in the Santa Cruz Mountains have had slope stability problems over the past 10 years". This is very effective when such information is available. It helps to put information in perspective without personal opinion. If possible, put the buyer in touch with a geologist. Hearing the information from a professional in the field can inspire confidence and reassure the buyer.

In the final analysis, any disclosure should be presented matter-of-factly and with clear explanations. Disclosure that is made at the beginning of a transaction allows plenty of time for the buyer to get questions answered. Disclosure left to the last minute may get some buyers wondering if there is something "wrong" with the property and can hold up a transaction.

JCP can assist you in fulfilling the mandated geologic disclosures and help put the information in perspective for your clients.