Should I buy a house in a flood plain?

18 Replies

I found a single family foreclosed house for a good price, but it is located in a flood plain.  Should that worry me or what should I be careful of? Any advice would be great thanks

I stay away from rentals in flood plains. The potential insurance rate hike can ruin the  numbers from one year to the next and once you pay huge insurance amounts, you can sell the house only with a steep discount. We are in a time of more rapid climate change with multiple 100 year floods possible in a decade. You might be perfectly fine but you might be not.

if its a flip, most buyers would rather  look  elsewhere. That can simply become  a problem when trying  to get rid of it and eventually you may make up for the low acquisition price by paying on the backside. If it's a rental then you may want to pay close attention  to the post by Bill  Turner.

I'm not 100% positive, but I believe that flood insurance requires you to pay the first 15% of damages. Does anyone have first hand experience? 

@Justin Tahilramani the FEMA policies (and most policies are FEMA) don't specifically state this 15 % to my recall. Assume in any flood you will have out of pocket expenses. For example the only basement coverage was for mechanicals in our case and most of the neighbors.

The best advise is to access Floodsmart.org.   Read about the changes going on in your area in mapping of the flood zone.  Know the zone you are in and the one you will be in for the future. Find out the house Base flood elevation. Find the current and future cost of flood insurance. (it can be thousands)   After that make your choice. 

 Being in a flood zone will impact your sell price unless you are in an area that is all flood zone or  where the added value of a water feature outweighs the flood zone impact.

It is floodsmart.gov like @Dana Whicker posted, I just notice I put .org... trouble with shifting gears. In any case if you ever have to deal with FEMA we found them ok. The FEMA people go from disaster to disaster so they are usually experienced but flood insurance is pricey.

We just sold a flip in a flood plain, so I guess I would say it depends. Our property was in a flood plain because it bordered a nice little lake with a decent view from the house. The buyer was willing to buy the flood insurance in this case because of the location. I have seen houses in flood plains with basically dry creeks in the back of the property, which would mean having to pay extra for the insurance with not much benefit.

What I was able to find out about flood insurance, though, is that the entire year's premium is due in a lump sum up front, but it is transferrable after I believe 60 days. If you bought the flood insurance and offered to transfer it to the buyer, it might work out okay if you get the property at a low enough price. Call around and find out what the flood insurance would be and factor that into your decision. I can say it is pretty expensive.

Also, double check the FEMA flood map. The agents I spoke to said they have made a lot of changes to the maps recently, and what may have been in a flood plain before may not be now. Although I got the impression that the maps were redrawn to include more properties, it is still worth checking to make sure.

@Ben Wenger

In general, I would not buy a flood plain house.  And I have owned flood plain property also, so I do know something about them.

1. The Biggert Waters Flood Law of 2012 significantly raised flood insurance premiums. The flood insurance comes from FEMA, a Federal government agency and more about flood insurance can be found on the www.fema.gov website. There was a subsequent law which mitigated the insurance premiums but that is only in the short term. In the long term flood insurance rates are going to rise. One investor here had his insurance rates go from $1,200 a year to $12,000 a year on a SFH rental property.

2.  Flood maps have been revised, but most of the revisions that I have seen have increased the areas of the flood plains.

3.  Flood levels are rising because of impervious surfaces up stream.  If the water can't be absorbed into the ground the run off naturally flows toward low points which flow to streams.  More water getting to these streams increases the risk of flooding down stream.

4. I had a property (had is the key word) where the FEMA flood level was 8 feet above the ground level. That means that the 100 year flood level, presumably a 1% chance of flood waters reaching 8 feet. And in the recorded history going back over 100 years at this site there never was a flood more than 8 feet above the ground. Over the last 20 years there had been about 3 floods there, never exceeding 8 feet. The last time it flooded the waters were 13 feet, going to 5 feet of water on the SECOND floor.

5.  The mud, filth, and debris are everywhere.  The inside wall cavities are filled with dirty water, and lots of bacteria.  Clean up is a mess, and the walls and all wood is saturated with filthy water.

6.  If you finance a flood property with institutional/bank financing they will require flood insurance.

7.  If you try to sell the property you will have to disclose that the property is in the flood zone and you will scare off many buyers.

8.  On the other hand I do know an investor who is buying flood zone property in FL for cash or private financing and NOT getting flood insurance.  He's getting cheap prices and renting the properties out and gambling that most years there won't be a flood, and when there is a flood it will be minor and its a cost of doing business.

9. One way of mitigating is to have an elevation survey done by a surveyor/engineer that shows that the property is not in the flood zone. That letter can be sent to FEMA and get you out of the flood zone.

10.  You can raise the house building it up so that it is higher than the flood level.  Often times in beach areas there are houses on stilts above the flood level.  I've seen houses as high as 14 to 20 feet higher than the ground to be "out of the flood zone by elevation."

11.  You can do less drastic measures, such as filling in the basement with stone.  The flood level is calculated by your LOWEST floor level.  By eliminating the basement, essentially turning the basement into a crawl space, you have raised your lowest floor from the basement to the 1st floor.   Other measures such as portholes or windows that open with the flood waters and let the water flow through the foundation are also available.  I've even seen a house where they built their own dike around their yard to keep flood waters out, hopefully the waters don't go over the top of the dike or breach the dike. 

Thank you for all the input.  Keeping in mind all the advice I received, I put in a low offer which was not accepted, so I am choosing not to pursue the property further.  Instead I will keep looking for another property that is outside of a flood zone.  Thanks again for the input.