What Listing and Buying Agents Need To Know About High Flood Risk Properties: A Snap-Shot View
In the middle of all the flood changes that have happened over the past few years, knowing what you need to do as a Real Estate professional can get tricky. To add confusion to the situation, most articles and discussions on flood insurance and flood changes leave people more confused than enlightened. We decided to compile a brief, nuts-and-bolts format for Real Estate professionals to give a quick “snap shot” of what listing and buying agents need to know when dealing with flood insurance on properties.
What Listing Agents Need To Know:
Talk with your client and ask if the property is in a special risk flood zone. Ask if they have a current flood policy; ask for a copy of the policy and a copy of the elevation certificate if they have one. There is a chance that the property, pending that the zone noted on the policy matches the current zone determination, may be transferred to the buyer…which could give you a great selling tool.
Bottom Line: You may be able to transfer the existing flood policy from the seller to the buyer. Always ask if they have an elevation certificate as this can be really helpful for the buyer and can be a strong selling point for you.
In some situations there will be a property that does not carry flood insurance currently, but the buyer will be required to carry flood coverage if they are obtaining a federally backed loan. An example of this could be if the house was purchased by a cash investor or if the home is paid for and the current owner decided to let the flood policy lapse since it was no longer required by the bank. If there is no existing flood policy in place, consider getting a flood quote for the property so you can get an idea of the flood premium. This is helpful to know before getting into the sales negotiations.
If the property is rated in a very high-risk zone with a high premium, it could make the property much harder to sell. You may consider speaking with your client concerning getting an elevation certificate or looking into mitigation options to lower the premium and make the home more marketable in some situations.
Bottom Line: If there is not a flood policy on the property, it’s a better practice to know what the zone and flood premium would be before entering into the sales discussion.
What Buying Agents Need To Know:
The most important take-away for a buying agent is to know the flood zone of the property before you place an offer. Remember the previous point under the listing agent’s section? The existing owner may not have a flood policy….but do you want to find out that the property is in a high-risk flood zone and that the premium is $4,ooo a year after you’ve placed an offer and your client is in love with the house? Probably not.
Another good practice is to ask the selling agent for a copy of the existing flood policy if applicable and the elevation certificate if available. If they do not have an existing policy or certificate, call The Braun Agency and ask us to map the property to provide the zone and premium for the flood insurance. We provide this service as a free resource for you. We can answer any questions you have and provide a zoning determination, policy premium and recommendations on possible mitigation options for clients referred into our agency. We’ll even provide a list of our preferred partners that can do the mitigation work for you if you’d like the resource.
Bottom Line: Always check on the zone and premium for flood before placing an offer. We provide this as a free resource for you and taking this step can save you countless hours and lost closings. Always ask if there is an existing flood policy and ask for a copy of the policy and an elevation certificate if available.
Additional Points To Note:
– The definition of “flood” is ground water rising. This means that if a city main water line breaks and floods your property….that would be considered a “flood” and is only covered under your flood policy.
– There is never any coverage for flooding on any home owner’s policy.
– It is a best practice to always advise your clients to get flood insurance regardless of the zone or mortgage requirements.
Have additional questions? Do you need us to map a property for you? Are you looking for a recommended partner for mitigation or financing a property? We can help! Give us a call today at 757-452-4563. We’re happy to help at any of our three local locations or by phone or online…or Facebook…or email…We’re pretty much everywhere.
Flood Insurance: What is a flood?
In simple terms, a flood is an excess of water on land that is normally dry. The official
definition used by the Nation Flood Insurance Program is “A general and temporary
condition of partial or complete inundation of two or more acres or normally dry land
area or of two or more properties (at least one of which is your property) from:
Overflow of inland or tidal waters.
Unusual and rapid accumulation of runoff of surface waters from any source.
Collapse or subsidence of land along the shore of a lake or similar body of water
as a result of erosion or undermining caused by waves or currents of water
exceeding anticipated cyclical levels that result in a flood as defined above.
*Mudflow is defined as “A river of liquid and flowing mud on the surfaces of normally
dry land areas, as when earth is carried by a current of water…”
What is Covered by Flood Insurance – and what is not?
Generally, physical damage to your building or personal property “directly” caused by a
flood is covered by your flood insurance policy. For example, damages caused by a
sewer backup are covered if the backup is a direct result of flooding. If the backup is
caused by some other problem, the damages are not covered.
What is insured under Building Property coverage?
The insured building and its foundation.
The electrical and plumbing systems.
Central air conditioning equipment, furnaces and water heaters.
Refrigerators, cooking stoves, and built-in appliances such as dishwashers.
Permanently installed carpeting over an unfinished floor.
Permanently installed paneling, wallboard, bookcases and cabinets.
Detached garages (up to 10% of Building Property coverage). Detached buildings
(other than garages) require a separate Building Property policy.
What is insured under Personal Property coverage?
Personal belongings such as clothing, furniture, and electronic equipment.
Portable and window air conditioners.
Portable microwave ovens and portable dishwashers.
Carpets not included in building coverage.
Clothes washers and dryers.
Food freezers and the food in them.
Certain valuable items such as original artwork and furs (up to $2,500.)
What is NOT insured by either Building Property or Personal Property
Damage caused by moisture, mildew, or mold that could have been avoided by
the property owner.
Currency, precious metals, and valuable papers such as stock certificates.
Property and belongings outside of a building such as trees, plants, wells, septic
systems, walks, decks, patios, fences, seawalls, hot tubs, and swimming pools.
Living expenses such as temporary housing.
Financial losses caused by business interruption or loss of use of insured property.
Most self-propelled vehicles, such as cars, including their parts.
Flood Insurance Coverage Limitation in areas below the lowest elevated
floor and basements:
Flood insurance coverage is limited in areas below the lowest elevated floor (including
crawlspaces) depending on the flood zone and date of construction and in basements
regardless of zone, or date of construction. See your agent or policy for specific
How Flood Damages Are Valued:
The value of flood damage in the Dwelling Form is based on either Replacement Cost
Value (RCV) or Actual Cash Value (ACV).
Replacement Cost Value:
RCV is the cost to replace that part of a building that is damaged (without depreciation).
To be eligible, three conditions must be met:
1. The building must be a single-family dwelling, and
2. Be your principal residence, meaning you live there at least 80% of the year, and
3. Your Building coverage is at least 80% of the full replacement cost of the building, or is the maximum available for the property under the NFIP.
Actual Cash Value:
- Actual Cash Value (ACV) is the replacement cost at the time of loss, MINUS the value of the item’s physical depreciation.
- Some building items such as carpeting are always adjusted on an ADV basis.
- Personal property is always valued at ACV
- This information has been obtained from various sources such as FEMA and NFIP and is only meant to provide general information. For specifics, always reference your FLOOD policy and give us a call if you have questions! We’re happy to help!
Choice Insurance Agency