Guest post by Robert Kociecki
You’ve found your dream home—it’s everything you wanted, and it’s in your price range! There’s just one problem: It’s in a flood zone.
It’s time to consider your options. The key is to gain a full understanding of the situation so that you can make an informed decision about whether the home is right for you. Here are seven things you should know before you buy a home in a flood zone.
- The Flood Zone It’s In
The term “flood zone” can mean many different things, depending on what zone it’s in. If you conduct your own search (which is highly recommended), you’ll find that many homes and neighborhoods are technically located in a Federal Emergency Management Agency (FEMA) flood zone—even homes with minimal risk. Don’t be alarmed if the home you’re looking at is in zones X or C; these are generally considered to be the zones with the lowest risk.
On a FEMA map, Zone X may appear either shaded or unshaded. A shaded X indicates an area where flood risk has been mitigated, including by a structure such as a dam or levy. Before you purchase a home in this zone, keep in mind that structures can fail—a mortgage lender may not require flood insurance for this zone, but flood insurance is recommended.
The zones with the highest risk are labeled with A or V. These high-risk areas, known as Special Flood Hazard Areas, carry a higher chance of flooding over the life of a 30-year loan. If you plan to purchase a property in one of these zones, be prepared: a mortgage lender will require you to purchase flood insurance, and it could be expensive.
- The Year the Home Was Built
A flood insurance rate map (FIRM) is a topographic map created by FEMA to show areas of increased risk and hazardous areas within a floodplain. These maps are used to inform zoning areas and construction plans, to prevent developers from building homes and commercial properties in high-risk areas. The National Flood Insurance Program (NFIP) uses these maps to set construction standards to ensure that buildings can withstand base flooding.
As flood maps change, structures that were originally built in low-risk areas can be rezoned into high-risk areas, and may not meet the necessary standards for the new flood zone. If you’re looking at a home in a flood zone, find out when the home was built. If the home was built before the current FIRM, it will not only be more vulnerable to flooding, but could also be subject to higher insurance premiums.
- A Low Risk Is Still Risky
According to FEMA, about 25% of all flood insurance claims come from low or moderate risk areas. Homeowners insurance does not cover damage due to flooding—for that, you’ll need separate flood insurance. Even if your risk is minimal and insurance is not required, FEMA recommends that you get it anyway. Premiums are generally lower for homes with lower risk—a small monthly payment could save you thousands of dollars in repair costs.
- The Cost of Flood Insurance
If you are thinking of buying a home in a high-risk flood zone, such as A, AE, or V, your mortgage lender will require you to purchase flood insurance. Insurance premiums are generally proportionate to risk: the higher your risk, the higher your premium. Another factor that influences the cost of insurance is the level of coverage you select. Mortgage lenders will require only that you insure the building, but you can opt to insure the contents, as well.
Before buying a home in a flood zone, get flood insurance quotes and make sure it’s an expense you can afford. Rates are set by a national standard, so there may be no benefit to getting multiple quotes from different insurance companies. However, you could be eligible for discounts.
- You’ll Need an Elevation Certificate
If you decide to purchase a home in a high-risk flood zone, your insurance agent and mortgage lender may request an elevation certificate. The elevation certificate (EC) contains information about the building’s location, characteristics, and its elevation compared to the estimated height of expected floodwaters. The EC is used to determine the estimated risk to the home—insurance companies use this information to set premiums.
The elevation certificate may also help you to make an informed decision about whether to purchase the home. FEMA suggests requesting a copy of the EC from the seller before you purchase the home. It may reveal information that is a deal-breaker, but it could also contain information that puts you more at ease. For instance, you could find out that the flood risk doesn’t affect your entire property—it may only apply to a section of the lot that is far from the home. Of course, even if a home is sufficiently elevated, it doesn’t necessarily mean that the house will never flood. But a low likelihood could ease your biggest concerns—and the cost of your flood insurance.
- Flood Risk Can Change Over Time
Flood maps change over time due to a number of factors. New housing development, commercial development, and construction of new roads can reduce the amount of land available to absorb water from heavy rainfall and melting snow. You could purchase a home with low to moderate risk, only to be remapped into a high-risk flood zone later.
While you might not be able to prevent flooding due to a natural disaster, you may be able to influence flood zone remapping in your area. Pay close attention to local politics, and look out for rezoning and development requests on the agendas of your city council meetings. Don’t be afraid to speak out if you’re concerned about how new development in your area could alter the floodplains and adversely impact flood dynamics.
- Mitigation Might Be an Option
If your dream home is a property that is located in a high-risk flood zone, such as a coastal or riverside home, you may be able to take measures to prevent—or at least minimize—flood damage to your home. For instance, you might have the option to elevate the home utility systems, such as the furnace, air conditioner, water heater, and electrical panel. Other options include sealing basement walls and installing floodwalls or water barriers.
Some mitigation measures come with a steep price tag, but if you’re in a particularly high-risk area, there may be grants available to help you offset the cost.
Buying a home in a high-risk flood zone can be risky, expensive, and challenging—but purchasing a home can be all of these things, no matter what flood zone it’s in. Before you buy any home, you should do as much research as possible, so that you fully understand the potential threats not only to the property, but the surrounding areas as well.
Robert Kociecki is armed with more than 15 years of experience as a real estate executive and serves as Senior Vice President of Property Management and Renovation at Altisource, parent company of Owners.com, where buying and selling your home is made simple and affordable.