Flood Insurance Update

A surprised buyer was recently shocked to receive a quote of $1,800/yr on top of his standard home insurance policy.  As the seller’s agent I’d disclosed that the property was in the flood zone according to the published FEMA map.  Nonetheless, reliance on knowledge of past flood insurance costs led to an assumption by the buyers agent that the cost would be no more than $400.00/yr.  The yard, not the home, was within the FEMA flood zone.  The back yard abutted a dry ditch so no one thought the cost for flood insurance would be significant.  The actual cost ($1,800/yr) led to the all too familiar “oh s*#t” moments we dread as agents.  To keep the deal in place my sellers immediately took it upon themselves to do whatever it took to help reduce the buyers cost.  They hired a surveyor to gather actual data since we learned that the FEMA flood zone lines were approximations only.  Our learning curve was steep and we heard as much that wasn’t accurate.  In the interest of sharing with my colleagues and home owners I hope to serve in the future, I’ll share below the key take-aways we’ve learned. 

  • If FEMA shows your property in the flood zone: it is not certain that your property is actually within the flood zone
  • FEMA relies on satellite data that is imprecise.  Using that satellite data FEMA draws smooth lines that only approximate reality. BFE data is missing almost everywhere.
  • To rectify this imprecision a surveyor must study discrete plots of land.  There is no process that is capable of affordably addressing this issue on a larger scale.  Additionally, water courses change over geologic time and Base Flood Elevations will change over decades.
  • The property owner alone must bear the cost to hire a qualified professional(s) to establish the Base Flood Elevation (BFE).
  • An “Elevation Certificate” (EC) can be used by a buyer to get a lower flood insurance premium.
  • Without proof (the EC) the insurance industry to protect their interests will always default to a worse case premium.  FYI, the insurance companies and mortgage do not profit from flood insurance premiums – all of the money flows to FEMA.
  • Getting the property removed entirely is a long and tedious process that may only be worth pursuing if you intend to hold the property for a long period.  
  • No one in local government, FEMA or the insurance industry has singled out your property or tipped off the insurance/mortgage that you are “in the flood zone”.  The mortgage holder discovers that your property is in the flood zone when a real estate transaction in your area triggers their computers to send a letter to every home owner in a neighborhood whose property is within the smoothly drawn, but often inaccurate, FEMA flood map. 
  • Homeowner’s who never had flood insurance may be getting a letter, as many have, telling them that they must buy Flood Insurance, if the homeowner doesn’t purchase the flood insurance expect the mortgage to buy it and charge you the full price.
  • Cooperate with your neighbors: If several homeowners border a flood zone area it makes sense to share the cost of hiring a surveyor. Have the surveyor start at the headlands of a drainage area and work downstream.   Remember you are guilty until you prove your innocence with a BFE you must present to your insurance provider.

Whether you are one of the unfortunate ones who get a letter or you are a realtor trying to move from contract to closing this post is intended to give you the information you need to fight an onerous levy forced on homeowners to fund FEMA.  Folks who build on the beach or in lowlands should pay the cost of flood insurance without relying on monies levied on a homeowner whose property abuts a dry stream bed that hasn’t flooded in a hundred years.  If you agree fight back and SHARE this post.

Wishing you all the best,

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