What the F...?

Are you affected by the zone?

What the F… Flood Insurance?

Ha! You totally thought I was going to say it. But in all honesty, if you’ve been in the position of having to deal with flood insurance you have probably felt the frustration that comes with it.

Is your house located in the floodplain? If you live along the Clark Fork or any other River, there’s a possibility it might be. If you’re buying or selling a home, this can be challenging for a few reasons. Here are a few things to consider when buying a home in the flood zone. And if you’re planning to sell your home in the floodplain, these are some things you will need to be prepared for. Flood insurance will be your biggest obstacle that will make or break the deal. The hope is that the positive features about the property outweigh the additional high cost associated with flood insurance. You can see where your property lies by going to the FEMA website and putting in your address… The map is a topographic map that shows the areas of increased risk and hazardous areas within the floodplain.

1. What area of the flood zone is your home located?

The area of the map in which your home is located makes a difference in which type of flood insurance you will need and what the cost is. Lower risk areas are labeled X and C, meaning flood insurance is most likely much cheaper. Insurance premiums will be lower for lower risk homes, but FEMA reports around 25% of all flood insurance claims come from low or moderate risk areas

Higher risk zones are labeled with A and V, and a mortgage lender is going to require the ridiculously expensive flood insurance in order to qualify for a loan. In my experience, premiums in this risk zone can be anywhere from $1400- $2000 yearly. That does not include the homeowners insurance policy required with the home loan. It’s expensive and will add a considerable amount to your monthly mortgage payment.

Homeowners insurance does not cover damage from flooding. That is why a separate policy of flood insurance is required for lending. Something to consider when buying a home in the flood zone. For a buyer, the upside to this is that usually homes in the floodplain are lower in price. Sad but true homeowners… If your home is located in the flood zone it will most likely devalue your home.

2. Flood risk is not set in stone

There are a number of reasons, but flood maps change over time. Whether it’s new building development, new road construction, or whatever the factor, the flood map is not set in stone. It’s possible that you could purchase a home in a low to moderate risk zone, only to be remapped into a high-risk zone later. I had this happen. Six years ago a sold a home in Drummond and it was not in the flood zone at all. A year after the owner bought the house, FEMA added the home to the 100 year flood zone. It made it much more difficult to sell when I resold the home last year. But it did have a successful sale. There is hope!

3. An Elevation Certificate might help

If you’re considering purchasing a home in the floodplain, there is some hope to paying a lower premium or not having to have flood insurance at all. However, it will come with some upfront costs before hand and you’re not guaranteed anything. You can hire an elevation surveyor or an engineer and have them issue an elevation certificate for the home. I would only recommend this if you are highly certain that the home is not in the floodplain or that the elevation is higher than the other homes in the area. It varies in cost and procedures needed done. On the last sale I did concerning an elevation certificate, the total cost when removing the property from the FEMA flood zone map was going to be upwards around $4000. But if you can get it removed, it’s a cost worth paying when considering the amount of flood insurance you will be paying over the term of your loan.

An elevation certificate is not required and it can be a gamble. But, if you can achieve not having to have flood insurance it is well worth it in the long-run. For a seller, it makes selling their home much easier if they are in possession of an elevation certificate containing information that the property is low risk or out of the flood zone. For a buyer, the information revealed may make or break the deal.

The flood zone is a nuisance, and a deal-breaker for some buyers. Chances are those homes in the floodplain are never going to flood and you’re stuck having to pay for the “what if”. But if you look at the challenge from another angle, you may be able to purchase a more affordable home. If you have questions about the flood zone whether you are buying or selling a home call me 406-240-5860. It’s a fiasco no matter which side of the transaction you are on, but it’s smart to stay informed in the challenges you may face.