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I have a contract to buy a house that is essentially through the home inspection phase. I have been investigating that fact that it is near a stream and whether or not it I should buy flood insurance. The sellers disclosure says no to the flood insurance question. When calling about my homeowners insurance I was referred to their flood rep who said the property was in a zone X flood zone and they recommended to carry at least a minimum policy $125/yr. they said that 1/3 of all flood claims come from such lower risk zones. This makes me nervous. Question is do I have an recourse getting out of the contract at this point or do I just accept this fact and choose to buy insurance or take the risk?
Last edited by FisherOne; 06-09-2012 at 06:45 AM..
Reason: Change title
Properties that are Zone X are not in a flood zone so it sounds like the disclosure is correct. As you were told, though, that doesn't mean that you can't experience flood damage. It only means that the odds are extremely low. Considering how inexpensive the coverage is, it might be a good idea.
I am in Florida. Most of the properties in my area are Zone X. When I'm asked about flood coverage, I point out that, given the right circumstances, almost all of the properties in the X zone in my area could have some exposure to flood damage.
$125/yr for $20k of coverage scaled up to $365/yr for $250k coverage with $1000 deductible. Replacement cost to build house at $205k. I know even max coverage still minor, but over 10 years, approaches $4k!
The flood insurance rep. lied to you. The percentage of claims from both low risk and moderate risk areas is under 20% of all claims. The information is available on the FEMA website. Of course of that less than 20% the majority of claims will be from the moderate risk areas making low risk areas such as your a minimal percentage of the claims.
Of course he did exactly what he meant to do, try to scare you enough to get you to buy a flood policy.
Check if the stream has ever flooded before, what the high water mark was and how high your the house sits. You might be sitting 10 feet above any previous high water mark and getting worked up for nothing.
And no it doesn't look like this would be a valid reason to back out of the contract.
Part of my parents' lot is on a flood zone because of a creek. What you don't know unless you have access to actual topographical maps and not just flood zone numbers is that most of the back yard is ravine, and the house is a good 50 feet higher than the creek is. Every so often, they get a letter urging them to get flood insurance because part of their lot is flood plain and just laugh because they figure that if the creek ever got high enough to flood the house, then things were so bad and weird that the neighbors next door were recreating Noah's ark.
I don't know why you are waiting until after the inspection period to get concerned about the flood issue. You had time when you first learned the house was near a stream - and you should have known/discovered that information before you even went to see it. When you take a look at the google/yahoo/mapquest/bing map, there's an opportunity to zoom out and get a larger picture. You can also opt for satellite view. If there are streams nearby, you'd see it - unless it's a seasonal stream. At that point, before putting in your bid or signing any p&s documents, you should find out about risk of flooding.
So I would think it SHOULD be, if it isn't, too late to reneg on your contract. As for the insurance agency, I'd find a different company as I detest antics of this nature. It's one thing to advise you about considering flood insurance for that 100 year flood issue, it's another to scare you.
OP said: "they said that 1/3 of all flood claims come from such lower risk zones."
Quote:
Originally Posted by Mike1306
The percentage of claims from both low risk and moderate risk areas is under 20% of all claims...Of course he did exactly what he meant to do, try to scare you enough to get you to buy a flood policy.
From FEMA website: "People outside of high-risk [in other words in low and moderate risk] areas file over 20% of NFIP claims and receive one-third of disaster assistance for flooding."
It could be that the agent was saying that a 1/3 of the disaster assistance goes to those in "lower risk" zones. Even if the lender doesn't require it, if you can afford it, it's not a bad idea. It's all about comfortably managing risk.
Flood Zone X is considered to be a "good" flood zone here in my flood prone area (the best one that I know of), and for that reason being in Flood Zone X raises property values. I have forgotten - - either mortgage companies do not consider flood insurance mandatory in Zone X, and/or the insurance is a lot cheaper than in other flood zones.
If I were in Flood Zone X I would buy flood insurance even if not required by my mortgage company. Believe me, flood insurance is cheap for what you get (cheaper than wind and hail, that's for sure).
Unfortunately I am in Flood Zone A, not in Flood Zone X. Houses three blocks away from me are in Zone X. Oh well! My house has never flooded in the 40 years since it was built, but that is just luck of the draw.
you would need a survey of the lot that also shows the home. Sometimes only a portion of the lot is in the flood zone. the portion where the house sits could be outside the zone. Often the zone is bordering the water.
Your insurance is charged based on where the home sits. Sometimes people have 2 different flood zones (or more) on their lot, especially if a large lot.
Talk to neighbors about flooding over the years in that area. Research newspapers over the years. Some areas in towns flood often when heavy rains and other areas never flood, even if they are both in a flood zone.
If you are given the option to buy flood insurance and not being forced to buy it from your lender, then I am not sure if you can get out of the contract without losing your down payment. Because the seller likely answered the question correctly. Just my guess, though.
Flood Zone X is considered to be a "good" flood zone here in my flood prone area (the best one that I know of), and for that reason being in Flood Zone X raises property values. I have forgotten - - either mortgage companies do not consider flood insurance mandatory in Zone X, and/or the insurance is a lot cheaper than in other flood zones.
If I were in Flood Zone X I would buy flood insurance even if not required by my mortgage company. Believe me, flood insurance is cheap for what you get (cheaper than wind and hail, that's for sure).
Unfortunately I am in Flood Zone A, not in Flood Zone X. Houses three blocks away from me are in Zone X. Oh well! My house has never flooded in the 40 years since it was built, but that is just luck of the draw.
You can get an elevation certification that shows that the house ins't in the flood plain. Cost out here is about $700 or so, which is way cheaper than one year of the flood insurance rider.
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Oh well! My house has never flooded in the 40 years since it was built, but that is just luck of the draw.
