Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
If u decide to buy house get flood insurance from closing
Grandfather in the lower rate since house isn't IN flood plain now
If they do put it in later
Try for letter of amendment w elevation certificate to FEMA
What about the dam? Having been through this, in the future I would want to investigate whether or not there would need to be a special assessment of neighbors to update or upgrade the dam. That's a lot of money.
Good point. I have some waterfront property that had a special assessment levied on it to do some dam repairs.
1) FEMA is $20+ billion in debt so the Briggert Waters Act was passed which substantially raised the flood insurance rates (as of Oct 1, 2013). An amendment was passed earlier this year to cause those rates to increase over time rather than a huge big jump at once.
2) The rates skyrocketed. Some parts of NYC have riders that are $15k a year, some parts of FL have $30k a year. The largest increase in my city was from $1600 to $6500, that I have heard so far. Out here it impacts resale greatly.
3) Your rate is based on what the elevation certificate says because the rate is based on the number of feet out of the base flood elevation (BFE) which can only be determined by a survey.
You might want to ask the seller to get you an elevation certificate now so an insurance agent can crunch the numbers for you on what a rider would cost if you end up getting moved into the flood plain. That is what I would advise my client to do.
Great advice! We've seen flood insurance rates in Florida rise dramatically and you're right, it is a deal breaker when it comes to selling. I'm glad the OP is focusing on this before the closing.
If u decide to buy house get flood insurance from closing
Grandfather in the lower rate since house isn't IN flood plain now
If they do put it in later
Try for letter of amendment w elevation certificate to FEMA
Even is they could grandfather, any future change they make to their mortgage, including a refinance or home equity loan, will trigger a flood insurance rate increase.
A FEMA letter of amendment is VERY difficult to get. I have been trying for 4 years now.
Despite what some other poster said, in our area, FEMA is NOT doing flyovers. They have contracted with the Army Corp of Engineers and have guys walking through neighborhoods and actually surveying.
The special assessment is a very good point. If the HOA owns and manages the dam, an assessment will almost be guaranteed down the road.
ALL of these picky little issues are why we swore we would never own in or near flood plain again.
We got letter a year or so before we sold our previous house (our son was living in it at the time) that showed our garage (attached) was now in the flood plain from the run-off creek behind our house...our rear property line ran to the middle of the creek but our fenced yard was about 5 ft from that line...
We were angry--we had already gone through was was the equivalent of a 100 yr flood several years before where some areas had significant damage/erosion/flooding, including deaths of couple of people traffed in flood water...
OUR lot never had water come on the property inside the fence/beyond the creek bed...
I spoke to two people with FEMA which has big regional office in town about 30 min away and both admitted that this new flood area recalculation was done by flyovers and looking at old maps--nothing new on the ground was done--
it was GUESSTIMATION at best--
We talked to the city engineers and local survey company--
several homes in our neighborhood that bordered that creek had the same problem...
We has the survey company do an elevation certificate and paperwork for a letter of map amendment...
We got it--except for one small area inside the fence/away from the garage which had been sloped for drainage when we went from a railroad tie rear wall to a concrete one 4 ft high...
the guys building the wall didn't add enough fill behind the concrete and there was erosion--
we didn't add enough dirt to raise that corner as high as the other...by 1/2 an inch...
so that corner IS in the flood plain but because there is no house on it the person we sold to didn't need flood insurance...
Most of what FEMA did in our area was CYA because of the rude wakeup call after a summer of rain (over 70 days I believe when it rained at least somewhat) and showed what lax county/city oversight had allowed to happen by not requiring developers to really engineer creeks/watershed areas for to mitigate damage from flooding...
One town allowed a trailer park in a dangerous low-lying area (flood plain but not "declared") and two people were killed when trapped in flash flood at night...
Even is they could grandfather, any future change they make to their mortgage, including a refinance or home equity loan, will trigger a flood insurance rate increase.
A FEMA letter of amendment is VERY difficult to get. I have been trying for 4 years now.
Despite what some other poster said, in our area, FEMA is NOT doing flyovers. They have contracted with the Army Corp of Engineers and have guys walking through neighborhoods and actually surveying.
The special assessment is a very good point. If the HOA owns and manages the dam, an assessment will almost be guaranteed down the road.
ALL of these picky little issues are why we swore we would never own in or near flood plain again.
They even admitted to our muni govt that they did flyovers. Where they saw blue, they sent out to muni to contact those areas around the blue that they were in flood plains. And the muni govt. had to do this since the Feds told them to, even providing them the form letter.
The reason the muni govt even told us I think is obvious....even though the govt used this very precise parameter (joking, in case anyone doesn't understand), the muni govt should have known better. And should at least have put a disclaimer on the letter. Most homes, overwhelmingly, were nowhere near the flood plain and were high on hills or low cliffs, which from above could look level with the surrounding land/water.
And not just around my home but miles and miles around. People hired surveyors to prove we were not in the flood zone. Met with local governing boards. It was a big deal.
The muni head of that project was let go a few months later when it settled down.
We got letter a year or so before we sold our previous house (our son was living in it at the time) that showed our garage (attached) was now in the flood plain from the run-off creek behind our house...our rear property line ran to the middle of the creek but our fenced yard was about 5 ft from that line...
We were angry--we had already gone through was was the equivalent of a 100 yr flood several years before where some areas had significant damage/erosion/flooding, including deaths of couple of people traffed in flood water...
OUR lot never had water come on the property inside the fence/beyond the creek bed...
I spoke to two people with FEMA which has big regional office in town about 30 min away and both admitted that this new flood area recalculation was done by flyovers and looking at old maps--nothing new on the ground was done--
it was GUESSTIMATION at best--
We talked to the city engineers and local survey company--
several homes in our neighborhood that bordered that creek had the same problem...
We has the survey company do an elevation certificate and paperwork for a letter of map amendment...
We got it--except for one small area inside the fence/away from the garage which had been sloped for drainage when we went from a railroad tie rear wall to a concrete one 4 ft high...
the guys building the wall didn't add enough fill behind the concrete and there was erosion--
we didn't add enough dirt to raise that corner as high as the other...by 1/2 an inch...
so that corner IS in the flood plain but because there is no house on it the person we sold to didn't need flood insurance...
Most of what FEMA did in our area was CYA because of the rude wakeup call after a summer of rain (over 70 days I believe when it rained at least somewhat) and showed what lax county/city oversight had allowed to happen by not requiring developers to really engineer creeks/watershed areas for to mitigate damage from flooding...
One town allowed a trailer park in a dangerous low-lying area (flood plain but not "declared") and two people were killed when trapped in flash flood at night...
They even admitted to our muni govt that they did flyovers. Where they saw blue, they sent out to muni to contact those areas around the blue that they were in flood plains. And the muni govt. had to do this since the Feds told them to, even providing them the form letter.
The reason the muni govt even told us I think is obvious....even though the govt used this very precise parameter (joking, in case anyone doesn't understand), the muni govt should have known better. And should at least have put a disclaimer on the letter. Most homes, overwhelmingly, were nowhere near the flood plain and were high on hills or low cliffs, which from above could look level with the surrounding land/water.
And not just around my home but miles and miles around. People hired surveyors to prove we were not in the flood zone. Met with local governing boards. It was a big deal.
The muni head of that project was let go a few months later when it settled down.
How did you discover that it "may be in a floodzone" soon? If you are in an incorporated area, check with the city engineer. Often, they have access to preliminary maps before FEMA officially releases the map to the public. This is often a long process and the city or county might have the information you seek.
My wife and I recently went under contract on a house we really liked. Before making the offer, we checked the flood maps (the property boarders a dam and pond) and saw that the AE zone started downstream from the property and didn't extend far from the banks. In DD we learned that the flood survey was being extended upstream, and that new preliminary maps will come out about a month after closing. From what we have been told, there is a possibility, however unknown, that the house will be at or near the edge of the zone when the new maps come out.
We're not really sure how to handle this. It could be nothing, or it could be very expensive mandatory flood insurance. We haven't been able to get decent estimates on rates, because every insurer is looking the current (soon to be old) maps which don't show the expanded zone. For obvious reasons, no one is willing to talk hypotheticals.
Part of me wants to argue for some reduction in price in exchange for taking on the risk, but I've been having a hard time quantifying the effect of needing flood insurance on selling prices - in the data I can come up with there are too many other variables.
We really don't want to walk away from the house over something that could be nothing, but it seems like moving forward could come back to bite us, and badly.
Thoughts?
I would run.
To protect earnest money, I would demand extensive and absurdly costly concessions that the seller would deny. I would politely walk away without having had my cash stolen.
Otherwise, if you need to figure out how much it impacts your value, you'll need to estimate the cost of flood insurance, and you'll calculate the value of needing flood insurance as the present value of a growing perpetuity.
For instance: Assume you estimate that you can regularly borrow for 6%, and that inflation will run 3%.
The present value of that cost is going to be:
Next year's insurance premium assuming it is in a flood zone / (.06-.03)
So, if you estimate the premium to be 2k/year...I'm pulling out a random number. I was quoted 1200/year for flood insurance and I am NOWHERE near a flood plane. A 1000 year flood recently happened in this area, and it was not even close to impacting my house.
2k / (.06-.03) = 2,000/.03 = $66,667. So if the house might be flooded and you needed insurance at 2,000 per year, the price of the house would have to be 67 thousand (rounded) less than a comparable house that would (virtually) never be at risk of a flood.
Does that help? Yes, finance is what I do.
My suggestion: Call the insurance company and ask for flood quotes on addresses that are in real flood plains near there. Use that as your figure for annual cost. You can modify the amount you expect to earn on your money if you want, but 5 to 6.8% has been the rate on student loans for a while, so it seems like a reasonable rate for a personal liability. Don't lower G below .03 unless you really want to screw up your math.
Then you'll have a real number for the cost of that risk. Ask your realtor to run a few comps on similar houses that are in an area that is definitely not going to be hit by a flood. If you don't know which areas they are, you can ask the insurance company what parts of town are unlikely to get hit by a one thousand year flood. Their maps should help. Look at the comps in the areas that are safe from flood, and subtract the present value figure that you calculated in the previous step. If the seller finds this price unacceptable, politely thank him and walk away. If he can afford to wait, he might wait and see if his property is included in the flood zones or not. If not, he has a much stronger selling position and deserves a higher price. If it is, he will have to accept the loss of value on his house, or find a sucker.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
