500 yr flood zone insurance

5 Replies

I'm looking at a property that has the front half of the house/yard in the 500yr flood zone and the back half is out of the flood zone. The house is on a crawlspace, and so I really don't think the house itself would ever flood, seeing as the back half is technically out of the flood zone and its the same height off the ground as the front.. My question is, do all houses in the 500yr floodzone require flood insurance, or is it more of a case by case basis? It's in zone x on the fema map. I have heard different answers from different people, and hoping to get some more facts/opinions.. I'd be looking to flip the property, so I don't want my end buyer to be scared off if their mortgage lender requires it.

@Alec Anderson Depends on the lender. You/They may not have a choice and you will have to buy it. It may be worth the exercise to at least get a quote so when you do have a buyer at the ready. You/They can decide if this works with yours/their numbers.

@Alec Anderson a Good question. @Gerald Grinter good answer. Back at @Alec Anderson every home across the US has been mapped into a flood zone the main question is then is the property in a High-Risk Flood zone usually designated by a "A" or "V". Lenders are required by law to pull what is called a Flood Zone Determination (FZD) on every property they are looking to extend an offer of a loan to there are like 70 companies that offer this service to the lenders and from time to time there is a difference in what the lenders report says and what an independent report usually run through an insurance agent says. An example is a lender pulls a report that says the property is in a high-risk flood zone and will require the purchase of flood insurance to give the buyer a loan if they are working with a flood insurance nerd and when he pulls the report it is in a low to moderate flood zone (usually an X but can be a B, C, or shaded X). There is a process of disputing a discrepancy on the FZD, however, each lender has a different one and it often times will delay the closing. I agree with @Gerald Grinter that it could be a good strategy to get a quote (as them for the FZD and display both at the showings). @Alec Anderson, it is too much of a legal liability if you ever say the property doesn't need flood insurance because if it floods and they don't have coverage it might come back to bite you when people are desperate and have to figure out how to rebuild after a major loss and a flood loss is costly. Stylistically 20% of all flood claims per FEMA data are in low to moderate risk flood zones (X's). Think 80% of the people who flooded last year in Houston were in X zone and didn't have flood insurance. We are expecting quite a few fingers pointed back at Realtors, insurance agents, lenders who told these people they don't need to buy flood insurance. Don't ever get yourself in this, I would have your CYA and always show what flood insurance would cost for any property you question might be at risk. Oh, an by the way an X zone flood policy called a Prefered Rate Policy (PRP) through the NFIP runs about $500 a year.

 @Robert Murphy

Thank you for that very informative post! I did a quick search and found this https://www.fema.gov/media-library-data/1504130201139-6583a0c5affd0c6d3d90aabe1116c647/PRPTables2017updated081617-508.pdf would this be the rates charged, based on home value, or does it vary from insurance carriers?

That pdf link was from this page https://www.fema.gov/media-library/assets/documents/17576

Wow @Alec Anderson you are very savvy. The rates are the same on the National Flood Insurance Policy (NFIP) policies rates are a standard rate they will be the same regardless of where you shop the policy with what agency or what carrier the really are the government as the insurance company and the carrier (Hartford, State-auto or (fill in the blank) are reselling the government policy. However, the premium will be the same no matter where you place it. A word of caution, however, most insurance agents don't want to write flood policies they are difficult policies (with the execution of the PRP) so the lazy agent, in my opinion, will tell you the flood policy is $5,000 a year. I hear this from my clients all the time. Same figure every state and (I am licensed in every state I only write flood policies so it is easier for me to be an expert on this subject.) Most agents are a generalist and will try to write whatever policy they can get the commission on. I only mention this because you are likely not going to be able to influence who the potential buyer is going to shop the policy with more often then not they will take it to who they have their auto with, just don't be surprised if you hear the figure $5,000 and if you do let me know I am keeping a tally on the ignorant agents out there. =)

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