Environmental Hazards: Know the Neighborhood

December 1, 2007

Today’s ultra health-conscious consumers want the assurance of safety and purity in the products they buy. They want to know that the toys they give their kids are lead-free, that the food on their table is untainted, and even, in some cases, that the shirts they’re wearing are made from organic cotton.

For home buyers, environmental concerns center on potential hazards in or near the home. Is the drinking water safe? Could toxins in the home endanger young children? Are there hazards nearby that could ultimately affect the value of the house?

Buyers Get More Savvy

Environmental due diligence — learning all you can about potential environmental problems before you buy a property — has been a part of the commercial real estate marketplace for 25 years. In the early 1990s, it entered the residential marketplace as well. By 1992, more than 20 states had laws in place requiring sellers to disclose known property condition hazards. Some states, such as California, also require disclosure by the broker or listing agent.

That same year, 1992, the federal government passed its lead-based paint disclosure requirement. The law requires that sellers and landlords of homes built before 1978 provide buyers and tenants with information about lead-based paint hazards and disclose the presence of a known lead-based paint hazard. Prospective buyers have a 10-day window to check for lead-based paint.

Despite these consumer protections, during the real estate boom years, stories abounded of buyers forgoing any kind of inspection in order to land their dream home. But the market slowdown and increased focus on the environment have combined to renew buyers’ attention to potential hazards, says Frank Lesh, president of the Des Plaines, Ill.–based American Society of Home Inspectors.

Although sellers in most states have to disclose known conditions that materially affect the property, sellers may not be aware of harmful substances present in or near a property. Likewise, inspections are typically limited to a review of a property’s own structure and systems.

Online Resources

Buyers who want to go further in learning about the health of a home and its environs have two options: They can conduct their own investigation using information available online or turn to outside experts, says Trevor Welby-Solomon, vice president of home inspection company Pillar to Post, which has home inspectors in 43 of the 50 states. The company has headquarters in Tampa, Fla., and Mississauga, Ont.

The U.S. Environmental Protection Agency posts maps showing Superfund sites around the country (Superfund is the federal government’s program to clean up the nation’s major hazardous waste sites) as well as extensive information on radon, the invisible, odorless gas that two studies have linked to lung cancer.

Finally, buyers can search using a home’s ZIP code to see what EPA-regulated facilities are in the neighborhood. Most areas have the requisite dry cleaners and auto shops, but buyers also can learn about nearby landfills and find out whether local businesses or governments have a permit to discharge wastewater into rivers. State EPAs and local health agencies may also provide useful information online.

If you represent buyers, you should be familiar with these online resources, but attorneys recommend that you let buyers do specific property and neighborhood searches themselves. Conducting an environmental investigation is beyond the normal scope of a broker’s responsibility and could lead to claims that the investigation was inadequate if disputes over environmental problems arise. Buyers should also recognize that the information available from such resources may not reveal every environmental hazard or condition.

New Inspection Services

For buyers who don’t want to do their own digging, Pillar to Post has begun offering a new service: a neighborhood environmental report. For about $200 more than the cost of a standard inspection, customers of Pillar to Post receive a report detailing potential hazards in a surrounding area. The report doesn’t replace testing for specific hazards within the home, but it can clue buyers in to what hazards to test for.

Sellers who suspect an environmental concern may consider having an environmental report run and testing done before they put their house on the market. That way, they may be able to take steps to mitigate the hazard — or adjust their price — up front, says Welby-Solomon.

Whether you’re representing the sellers or buyers, getting potentially unpleasant surprises out of the way before a closing reduces your risk of liability. But how do you help ensure that an environmental audit isn’t a deal killer? First, prepare buyers. No house is perfect. Like a home inspection, a neighborhood report may find some things amiss, but that doesn’t mean the buyers should automatically rule out the house.

Second, be ready to help buyers obtain information on remediation and its costs.

Finally, provide resources that help buyers analyze how important the risk is to them. Buyers with no children who don’t plan any renovations, for example, may be less concerned about lead-based paint than a family with small children would be. The report can also be a positive selling tool, assuring buyers they’re in a safe home and neighborhood.

Stacey Moncrieff

Stacey is executive editor of publications for the National Association of REALTORS® and editor in chief of REALTOR® Magazine.