NHDS — KEY INGREDIENT IN TRANSACTION

In 2009, the U.S. Department of Housing and Urban Development (HUD) declared that the National Hazard Disclosure Statement (NHDS) is a settlement service to be listed on the HUD-1. Since the state of California legally requires a real estate transaction to include the disclosure of natural hazards before closing escrow, and since the NHDS is now deemed a settlement service that must be added to the HUD-1, failure to do so is a violation of the Real Estate Settlement Procedures Act (RESPA).

California Civil Code Sections 1103.2, 1103.5, and 1103.7 require that the seller and the agent exercise good faith in the selection of the NHDS provider. This holds real estate agents and their sellers responsible for the choices they make regarding the selection of which disclosure provider of NHDS for the transaction — the choice is theirs and theirs alone. And since the NHDS is now considered a settlement service by HUD, the selection of the disclosure provider is under the scrutiny of RESPA. So it is impermissible for anybody — an escrow officer, transaction coordinator, anybody — to take that choice out of the hands of the seller and his agent.