I’m looking for a new home. One house that I’m looking at is in a FEMA high risk zone but has never flooded (It was built before the local “Big One”; it shows no damage, and I know some of the locals that have said that the neighborhood has never flooded.) I called an insurance agent and was given a quote of $5,200/year for FEMA flood insurance, but he said that this might be reduced depending on an elevation report. I could be way off with this, but I was left with the impression that the $5,200 quote was a one size fits all number for anything in that flood zone.
I’d like to have a rough idea of what I’m getting into before going under contract. Is there any way to get a rough idea of what the insurance will cost without paying for an elevation report, or is that $5,200 quote a fair guess by FEMA? I did ask this afternnon for documentation of the current owners’ flood insurance policy and rates, and I’ll probably discuss insurance with their agent when it comes in.
…Or should I just accept that this house is really gonna cost that much more per month.
I spoke with a realtor and also an engineer about this very issue recently. Some things I was told:
By the engineer - weather patterns are unpredictable and are in many cases changing for the worse. A lot of places that are currently listed as 100 year flood plains are really in 20 year flood plains. I do not know how to determine what areas are more accurately mapped, but from my conversation with the engineer, I would view the maps as being overly optimistic in their designations(when it says 100 year floodplain, you are more likely to be in a 20 year floodplain than a 200 year floodplain).
Flood insurance rates will most likely go up; flood insurance had been heavily subsidized until about 1 or 2 years ago and rates have gone up since the subsidies were changed. I believe rates now are still effected by government intervention in pricing, so they could go much higher if legislation changes. You will be required to have flood insurance for as long as the property is mortgaged; so if rates go up, you will not have any options. Also, if the rates go up it will have a very negative impact on the resale value.
Whether it flooded or not before is irrelevant; the flood designations are made by determining the percentage risk that an area will flood above a certain point in a given year. If your property flooded last year and you are in a 100 year floodplain, then you have a 1% chance of it flooding again next year. If it has not flooded in 50 years you still have a 1% chance. This is actually by design in many cases - levees are built so that there will only be a 1% chance of them being breached in a given year. They could build them so that the area would be completely flood proof but the expense to do that would outweigh the benefit.
From my own perspective, it sure is tempting to buy something in a floodplain - I was very interested in a house that was partially in a flood plain; I even looked into pricing out flood prevention walls. The condition and the price of the house were too far from what I needed for me to look into it more than I did; there was mold everywhere and the roof needed lots of work…
As an owner of a home in an “unnumbered A zone” (the highest risk classification) that $5200 annual premium is probably accurate. When I priced out insurance in 2008 it was $1900. And as mentioned, the National Flood Insurance Program (NFIP) is finally revising rates. Rates for some folks are being held in a sort of Grandfather way, but new policies are being charged rates that reflect the real losses of the last 30 years. And frankly, as a taxpayer, it’s about time.
This comment by Mr. Nylock should be repeated: “You will be required to have flood insurance for as long as the property is mortgaged; so if rates go up, you will not have any options.”
I am fortunate NOT to have a mortgage so I do NOT have flood insurance. I’m willing to take the risk myself and my home is constructed to minimize flood damage. But I recognize that if I were a homebuyer confronted with a $5000 annual premium for 15 to 30 years my own property would be off my consideration list, no matter how great a deal it might be to purchase.
Any new buyer of a home in a flood zone is supposed to pay the full price for flood insurance-currently $5200/yr sounds about right.
The key to the home is the elevation report. That is at least as important as an appraisal. Each flood zone category has an elevation. If the house is above the elevation it isn’t in the zone. The maps are the default elevation if there is no individual survey.
The key is to prepare the house for the survey. The surveyor will report the lowest elevation as the elevation of the house. Literally if the pad for the air conditioner is lower than the slab-that will be the elevation for the entire house. If the house is close to the zone elevation, it is worth a LOT to get everything elevated for the survey. Having a few inches of concrete poured into the garage is not out of the question to get over the edge. As has been pointed out, rates can only go up. Two inches may be worth thousands a year. Check with a knowlegable contractor/builder/surveyor and find out the best strategy for the home. And if there is no way to elevate the home, take that into account in the price.
Surely, this must make homes in a high risk zone almost unsaleable?
We have a similar problem here where people are ‘trapped’ in houses that they cannot sell. Although they have a relatively low ‘grandfather’ rate, this does not apply to a new owner. There is a scheme for these homes called Flood Re. Under this premiums will be capped at between £200 and £500 for the flood element of the insurance, and payouts for flood damage will come from a central pool of money, not the taxpayer. It does not apply to new homes.
I have a relative who lives in a house which floods every year. The whole downstairs id tiled with swimming pool tiles and the electrics are all high up. There is a valve on the sewage pipe too. They have just learned to live with it.
It sounds like the dilemma facing people who own houses in “ghetto” neighborhoods. There are no buyers for their house, so often the only way to get out is to just abandon the house and let the city sieze it for back taxes.
My bolding, as that bears repeating. Weather patterns are changing rapidly, and flooding is becoming much more common in many places. The existing 1 in 100 flood zones are usually very out of date, and as said, are approaching 1 in 20, and in some areas I have intimate knowledge of, 1 in 3.
I don’t know why anyone would buy in an identified flood zone. Even with insurance, going through the aftermath of a flood and subsequent rebuild is very disruptive and painful. Keep in mind that as more people avoid flood zones, your ability to sell in the future greatly reduces. You might end up stuck.
I would personally walk away from that house, unless any offer you make contains a contingency that you can back out depending on the results of the elevation report.
We just purchased a condo in Florida for the in-laws to live in. Supposedly it’s in a better area, flood-wise, and it passed a wind loss mitigation inspection, but yeah, we opted for flood insurance (“only” 200 a year but that just covers the contents, not the structure). I expect that will just get more expensive and we may well be stuck with the place once the in-laws no longer need it.
A look at a Flood Elevation Certificate will answer this question. Visit www.fema.gov and do a search for “flood elevation certificate.” The key item is the “lowest habitable floor.” Some basements are considered habitable, some are not. In my home the lowest habitable floor is about 11 (eleven) feet above the ground and 7 (seven) feet above the Base Flood Elevation (BFE). The BFE is that magic line where the 100 year flood did (or will) reach at some point in the past. So while my home sits on ground that will be flooded, my (expensive to repair) living space will probably not.