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Selling a Home in a Flood Zone: How to Help your Client

Selling a home in a flood zone is typically more challenging than selling other types of properties. These homes are located in areas that are designated as “high risk” by FEMA because of their low elevation and risk of flooding. If a home is in a flood zone, FEMA has estimated that there is a 25% chance that the property will be flooded during the span of the typical 30 year mortgage.

As such, potential buyers will be faced with purchasing flood insurance, which is often more expensive than typical homeowners insurance policies.  In some flood zones, it is nearly impossible to find affordable flood insurance. When coupled with the other costs involved in purchasing a property, buying a property in a flood zone can feel overwhelming and unattainable. As a seller’s agent, it’s important that you understand the challenges involved in flood zone properties so you can keep all parties moving toward the closing table.

Here are a few of the challenges that you and your clients will likely face when navigating the sale of a home in a flood zone.

Challenges to Selling a Home in a Flood Zone

  • Selling a home in a flood zone will require buyers to purchase additional flood insurance that can cost thousands of dollars a year, pushing the cost of ownership higher than the buyers may have expected.
  • Many banks require comprehensive flood insurance which is harder to find and can be considerably more expensive.
  • Subsidies for the Federal flood insurance program were slashed in 2012 while insurance rates are increasing by 25%, which could mean that some flood insurance premiums will more than quadruple over the next few years.
  • Legislation to reinstate subsidies to reduce premiums has been stalled in Congress, leaving sellers unable to estimate what premiums will be for the potential buyers.


Seller’s Responsibilities for Flood Zone Home Sales

The main responsibility for selling a home in a flood zone is full disclosure. This information is available online and is updated regularly. You can view floodplain maps in your area at FEMA.gov. You can also conduct a land survey in order to provide buyers with documentation for the base flood elevation of your home.

Equally important, your listing price should also reflect the additional costs that buying required flood insurance for the home will create. This is one of the main ways that your sellers can make themselves competitive with other homes not located within a flood zone.


Strategies for Selling a Home in a Flood Zone

Given these challenges, it is still very possible to sell a home in a flood zone. Here are four helpful strategies for putting buyers at ease while helping your client to sell their home:

  • Challenge the flood zone designation. If you feel that the property should not be classified as high risk, your clients can make a formal appeal through FEMA to remove the designation. It could take up to two months for a decision.
  • Make the necessary improvements. If the property is just a few inches outside of the next flood zone level, your clients could elevate their home above the floodplain using pilings. This is an expensive process and takes time, but could be worth the cost if they are having trouble selling the home.
  • Show buyers that the risk is low. If your clients have never had to pay a claim for flooding and the area has not suffered from flooding for many years, request a report from the Comprehensive Loss Underwriting Exchange (CLUE) to show potential buyers.
  • Discount insurance costs for a year. You can build good will and show good faith to buyers by discounting the cost of insurance for a year from the purchase price. This will help get the buyers in the house and will help them prepare for the next year’s flood insurance bill.


Tools for Navigating Home Sales in Flood Zones

To learn more about specific challenges facing agents and tools for navigating home sales in flood zones, take advantage of the new online course from McKissock. Learn about the Homeowner Flood Insurance Affordability Act, how it will impact flood insurance rates, and much more. Your clients will thank you.