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What to Know Before Selling a House in A Flood Plain?

Did you know that floods cause billions of dollars worth of property damage?

Floods can destroy a property's structure and even dishevel a home's foundation. A flood is a real nightmare for homeowners. 

So, think about it. Would someone want to buy a house that might get flooded? 

It's not easy to find buyers for homes in high-risk areas.

Don’t forget that there are some strict state disclosure requirements you cannot overlook when selling a home. But don't worry - I got your back.

In this post, I’ll go over everything you need to know before selling a house in a flood plain.

The Challenges Of Selling A Property In A Flood Plain

When people see words like "high-risk," "flood plain," and "water damage" in a home listing, they tend to be pretty cautious. Many people don't even bother looking at houses in flood plains.

The-Challenges-Of-Selling-A-Property-In-A-Flood-Plain

Also Read: How Natural Disasters Cause Distressed Properties

So, there's not a lot of demand for houses in high-risk flood areas. 

I mean, who wants their stuff and their money to get washed away in a flood, right?

Because of this, these houses usually sell for less money. How much less depends on which flood zone the house is in. (We'll talk more about that later.)

Another issue is that it can be hard for buyers to get a mortgage for a high-risk property. 

Banks don't really want to lend money for a house that might not survive a flood.

The Federal Emergency Management Agency (FEMA) says that houses in high-risk zones have a 25% chance of flooding during a 30-year mortgage.

Basically, finding someone to buy a house in a flood-risk area is pretty tough.

What to Know Before Selling a House in A Flood Plain?

So, you've decided to sell your high-risk property. It's going to be a challenge, and there are even state requirements, such as disclosure laws, flood zones, and flood insurance, to fulfill for a flood plain property.

Let's take a closer look at each of these.

Find The Flood Tier Of Your Property

First things first, you need to know your property's flood tier. 

If you're a real estate agent, you probably already know about high flood areas in your state. But if you don't, you can check the FEMA website. 

Just type in the address, and it'll tell you the flood tier.

There are three main flood tiers:

  • High-risk Flood Zone: If your flood zone on FEMA's map has a code with A or V, your property is in a high-risk flood zone. It's also called a special flood hazard area.
  • Moderate Flood Risk: Your property will have a 0.2% annual chance of flooding if it's marked with Zone B or shaded Zone X.
  • Minimal Flooding: An unmarked Zone X or Zone C means your property isn't very likely to flood.

Disclosure Laws

There are state-specific disclosure laws to follow when you pitch your property to a potential buyer. These laws are different in each state, but almost all states have them.

The general rule is that you shouldn't hide important facts about your home from potential buyers. 

This includes information about flood zones and insurance requirements. You'll need to fill out a Seller's Property Disclosure form, but you should also tell the buyer directly.

For example, in Texas, you need to tell the buyer:

  • If there's been any water damage to the house before
  • Which flood zone the property is in
  • If you've ever filed a flood insurance claim for the property
  • If the property has any leakage issues

Basically, you need to be honest about your home and not try to hide anything.

Also Read: Mold And Water Damage In Distressed Houses

Should I Apply For Flood Insurance?

Flood insurance is separate from your regular homeowners insurance.

Besides being important to have, most mortgage companies will require you to have it.

Flood insurance helps homeowners if their property gets damaged in a flood. 

Usually, low-risk areas have lower premiums, and high-risk areas can have expensive annual premiums ranging from $1000 - $2500.

Here's an interesting fact: after Hurricane Sandy in 2012, flood insurance premiums on Long Island went up a lot. 

Now, let's talk about NFIP - the government flood insurance program for homeowners.

The National Flood Insurance Program (NFIP) started in 1968 when private insurance companies stopped offering flood insurance because they were losing too much money from floods. 

So, the government stepped in to provide cheaper flood insurance for homeowners in high-risk zones. Depending upon your zone, you're liable to have a flood insurance policy for your home per the government's mandate.

Your Options For Selling A Flood Plain Property

Now, let's talk about the two ways you can sell a house in a flood plain.

You can either take the traditional selling route or find a real estate investor for the property.

Also Read: Selling a house with water in the crawl space

Let's look at both options.

Go Traditional

The first option is to hire a realtor or real estate agent to list the property and find potential buyers. 

This option usually takes more time and might include repair costs. You might need to do a lot of repairs and even raise the house.

You'll also need to pay the agent's commission, which can be thousands of dollars. 

Plus, you'll need to stage the property, advertise it, show the home, and hold open houses. 

The whole process can take months, but it might be worth it if you can get a good offer.

Sell As-Is To A Real Estate Investor

If you don't want to deal with repairing your home and listing it with an agent, you can sell the property as-is to an investor. 

You probably won't get as much money this way, but your property will sell quickly (within weeks) and you might end up with almost as much as you would after listing it on the MLS.

These investors are professionals and can figure out the price without an appraisal. 

The best part? You won't need to advertise the property or list it. 

These guys will buy using cash offers, so you don't have to worry about mortgage issues.

Here are some tips to get a good offer price for your home:

Also Read: No response from buyer after home inspection

Keep in mind that you should expect a lower price. Why? 

Well, homes in risky zones are already worth less, and since you're not spending money on repairs, commissions, or ongoing mortgage costs, it makes sense that the offer would be lower than what you might expect for a fixed-up house that's not in a flood plain.

Making Your Property Attractive For Potential Buyers

Here are some useful tips that can make your property more appealing to potential buyers.

Reduce Flood Risks

First, you need to address any concerns about your property. How? By making sure your property can handle and prevent flood damage. 

Here's how:

  1. Seal the foundation and basement walls
  2. Move your utilities like the heat pump or the HVAC system to a higher position by creating a platform. Basically, keep them out of reach of flood waters.
  3. Use brick and gravel driveways instead of cement to prevent flood damage
  4. Get a licensed plumber to install a sewage backstop device
  5. Place absorbent mulch in your yards
  6. Install flood vents in the crawl space to avoid water buildup and mold. 

The vents make sure that water moves freely without damaging the structure. According to government rules, the vent should be below flood levels with two openings.

  1. Install a sump pump in the basement or crawl space if there isn't one already

All these repairs and changes will help keep flood water out of your home. They'll also lower your insurance premiums because insurance providers will see your property as less likely to be damaged by floods. 

Plus, these repairs will make buyers feel better because the home will be safer from flood damage.

THE BIG PROBLEM here is that all of these options cost A LOT OF MONEY.

Also Read: What to do When You Cannot Afford Home Repairs?

Elevate Your Home

If your home is even one foot above the base flood elevation, you can get up to a 30% reduction in your premiums.

That said, raising an existing home can be super expensive - usually around $180,000-$250,000!

But it might be worth it for the benefits. 

You can even get a certificate of elevation from the local floodplain manager, which says that your house is above the height of the floodwaters.

Incentivize The Buyer

You can also use flood insurance discounts as a selling point. 

You'll need to provide a 1-2 year warranty for the home anyway. So if you could offer to cover 1-2 years of insurance premiums for the property, it might help convince buyers.

Price The Property Accurately

Sometimes, being really honest can work out well. When you're pricing your property, make sure you think about the cost of being in a floodplain, repairs, insurance, mortgage, etc. 

Price-The-Property-Accurately

There are buyers at every price point, so if you price your house competitively for its quality, you're likely to attract a buyer quickly.

But let's clear up a misconception. 

Many homeowners think that the value after a flood is just the home's value minus repairs. That's not right. This doesn't account for the already low home value and the time, risk, and expenses for homebuyers.

If you're not sure, you can always get an appraisal for an accurate estimated price.

Prove That Your Property Is Risk-Free

If there haven't been any major flood disasters in your area for many years, you can use that to your advantage and convince the buyer that the property is safe.

Also, if you think your property shouldn't be classified as high-risk, you can ask FEMA to remove it from that classification. 

If you're successful, your home value is almost certain to go up.

Wrapping Up

Selling a house in a flood plain is definitely challenging. But with the right approach, mindset, and strategy, you can sell your property quickly and get a better price.

So, if you’re having trouble selling a house in a flood plain, I hope this post helped you make an informed decision!

Also Read: Selling Your Home? 5 Essential Maintenance Tasks You Can’t Ignore

FAQs

Can Flood Zones Shift Over Time?

Yes!Over time, flood zones can change due to environmental influences and changes in levee classifications. 

So, even if your home isn't in a flood zone now, it could be in the future.

What To Do When My Home Is Affected By A Flood?

The first thing you should do is call the insurance company. 

It might not be the first thing on your mind, but you should ask the insurance company about your coverage as soon as possible. 

The coverage depends on your policy and what caused the flood. It's best to document all the damage and try to get reasonable coverage.

However, some steps to reduce property damage might include:

  • Pump out the flood water to prevent mold
  • Dry out the things you can save
  • Clear off the dirt and mud
  • Clean and disinfect the entire home
  • Get rid of things that can't be saved

Cash Offer Or The Traditional Way: Which Option Is The Best?

It really depends on your situation. 

For example, if you have time to sell your property and can afford repairs, it's best to go the traditional way. Fix up your house, make sure it can handle flood water, and try to get a higher offer. Of course, it'll take time to find a buyer.

On the other hand, if your home needs expensive and extensive repairs and you want to sell it quickly, it's better to approach a real estate investor and accept a cash offer.

What Are Flood Insurance Rates?

A flood insurance rate determines the monthly premium of a flood insurance policy. It varies according to how severe floods are in your area and where your property is located. 

In most cases, the average rate of flood insurance through NFIP is $770 per year.