By Karen Catuogno, Broker/Owner, Abbott Properties LLC
It’s important to know if that property you want to buy is located in a flood zone.
What is a flood zone? In simple terms, a flood zone is a geographic area where it’s been determined there’s a risk of flooding. The zone looks at the elevation of the property in relation to the nearby water areas. The risk of flooding can be low to very high. You might automatically think ocean property because that’s obvious. But flood zones exist all over the country. They are found next to rivers, lakes and streams when low lying land is close to water. You would be surprised where you will find a flood zone.
There are three basic types of flood zones.
The “V” zone is the most hazardous type of area. It includes beachfront properties where the hazard of flooding is increased because of wave velocity. Waves can grow to enormous heights during a hurricane and high winds will push that water with great force and long distances inland. The “V” Zone can include that waterfront cottage, but it might also include those houses going several streets back if the area is flat.
The “A” Zone” is the next in line for risk because it is subject to rising waters from a body of water. That body of water can be near the ocean is right and might be right next to that “V Zone. But an “A” Zone can also be near a lake, river or stream. Remember, lakes, rivers and streams are everywhere. That lazy, gentle creek next to the rural house in the Mid-West can turn into a raging floodwater under the right weather conditions.
That last major zone, the “X” Zone has minimal risk of flooding. Again, it’s safe for now. But keep in mind that could change in the future.
Knowing if a property you own or plan to buy is in a flood zone is critical because it affects your ability to borrow using your property as collateral. Think mortgage. If you plan to buy a property in a “V” or “A” flood zone, you will be required to purchase flood insurance in order to get a mortgage. Flood insurance is different than your homeowners’ insurance. Homeowners’ insurance typically excludes flood damage. Think two insurance policies, not one.
The yearly cost of flood insurance can sometimes be very significant. Because the bank or mortgage company always wants to make sure you can afford that house, it will look at the cost of that flood premium and the homeowners insurance premium, in addition to the taxes, principal and interest payment. And if you already own that home? If you decide to refinance or take out a line of credit, flood insurance will be alomost always be required, even if you have never had it in the past.
There are also the non-financial factors. Flood insurance will get you cash if you have a loss. But it won’t replace your precious family photos and mementos. If you have a major loss, it could be months of rebuild before you are able to live in your house again, And that’s after you go through the red tape of filing that flood insurance claim. Are you ready to live in temporary house for months while you rebuild? That’s an emotional cost.
FEMA, the Federal Emergency Management Agency, is responsible for determining whether an area is “in” or “out” of a flood zone. These determinations are updated from time to time. After Hurricane Sandy, for example, many of the flood zones on the east coast were updated. A property once considered “out” of a flood zone, can find itself “in” a flood zone when the flood zone boundaries are updated. Keep that in mind if you buy in an “X” Zone.
If you do make the decision to purchase in a flood zone, there are two ways to buy a flood policy. You can purchase insurance through the federal government under the National Flood Insurance Program. That program will get you a maximum of $250,000 coverage for your home’s structure and $100,000 for the contents. If your house costs more than that to rebuild or repair, that’s an out of pocket cost for you. Or you can buy flood insurance through a private insurance company. That will provide you with higher coverage limits. The cost will depend upon the coverage you buy as well as the zone in which you live.
There’s a lot to think about when buying any house. Flood zones is one big factor most people don’t think about upfront. That’s why it’s important to work with an agent that knows how to help you determine if the house is in a flood zone and where to go for information about flood insurance.
The real estate professions at Abbott Properties are always happy to help with any questions you have on Flood Zones. Give us a call.
“Government Rules and Your Property” is a series that explores how federal, state and local laws and regulations affect your property.
Karen Catuogno is a commercial and residential broker licensed in Rhode Island and Massachusetts. She maintains, develops and grows business at the agency as it relates to sales and listings. She also works to recruit agents, in talent development and leads the agency’s marketing program. Karen is a retired attorney.