What These Reports Cover
A third-party property disclosure statement pulls information from official government maps and publicly available data. It flags conditions and factors that might affect a property. The statute lists specific categories: FEMA flood zones, military airports and training routes, expansive soils, earth fissures, special tax assessments, radon gas potential, and environmental superfund sites.
A disclosure report pursuant to this section may be provided to the buyer or seller of real property by a third party as authorized by the buyer or seller and shall be based on officially adopted and electronically posted or otherwise readily available governmental maps or information.
A.R.S. § 33-423(A)The report can also include any additional condition the buyer or seller authorizes and the provider agrees to research. Sellers are required to disclose material facts about the property under separate statutes. A third-party report can supplement those disclosures with data the seller may not have access to on their own.
These reports may also flag whether a registered sex offender lives nearby or whether a death has occurred in the home. While not all of these items are considered material facts under the law, they can influence a buyer's decision.
Provider Accountability and Indemnity
Third-party providers are not working without accountability. They must carry errors and omissions insurance of at least $1 million per occurrence and $10 million in aggregate. Failing to maintain that coverage is a Class 1 misdemeanor.
If a report contains an error, the provider must defend any resulting lawsuit, cover the buyer or seller who authorized the report, and pay attorney fees and costs. This protection extends to licensed real estate agents representing the parties. However, if the buyer, seller, or their agent already knew about the error or modified the report in a way that caused the mistake, the provider's obligation does not apply.
One important point: the listing of a condition in a disclosure report does not automatically make that condition a material fact for the transaction. Materiality is determined under other applicable law.