How to determine the truth about home flooding

Castles in the Sand

Home inspections and seller property disclosures are an intricate part of home buying. You would think a seller’s disclosure is pretty clear cut, but it’s far from that, especially when it comes to flooding.

Flooding is the one thing potential property owners on bodies of water want to know the most about but, in fact, know the least. In Florida, there is a seller’s property disclosure form provided by the Florida Realtors Association. Although this form is provided to sellers when they list their property for sale with a real estate professional in Florida, they have no legal obligation to fill it out and sign it. Sellers and their realtors do, however, have a legal obligation to disclose to the buyer all facts that can materially affect the value of the property. It just doesn’t have to be in writing.

When it comes to the disclosure on previous or present flooding, sellers are only required to disclose what they know. If the house was flooded five years before they purchased and they were not aware of it, there’s nothing to pass on to a new buyer. Essentially sellers are required to disclose material defects to buyers that they know about.

Since most home inspectors cannot determine if a home has been flooded in the past, where do buyers go for a history of the property’s flooding? It’s a good question and one that U.S. lawmakers are just starting to look at. The House Financial Services Committee advanced legislation in June that would require the Federal Emergency Management Agency (FEMA) to share information about a property’s flood history. This would be a least a step in the right direction for buyers, but when and how this information is provided could be a long way off.

FEMA has recently released data on all 2.4 million flood damage claims processed since the 1970s. Unfortunately, it’s not a practical reference for individuals because of size and lack of address referencing. FEMA does update federal flood zone maps but again that is geared more for insurance companies and gives no information specific to individual properties.

There are some organizations that are trying to improve flood disclosure information. One of them is First Street which collaborates with Columbia University and the Massachusetts Institute of Technology among others. It is building a comprehensive database of homes that have flooded or are at risk of future flooding. It uses satellite imagery, high watermark data and other information, including FEMA data on flood claims, to determine if homes may have been flooded.

This information is not new; it has been available to large real estate owners but was financially out of reach for individuals. First Street claims it will launch its database within a year and it will be free for individuals to access. Sounds great, but there is a big margin of error within some of this information. It goes without saying that the impact on property values could be enormous. Will buyers’ willingness to purchase a property be influenced based on this new, possibly subjective information?

Next week we’ll talk about all the other disclosure requirements in Florida and there are plenty. Purchasing property on or near bodies of water, oceans, rivers and lakes are all susceptible to flooding and are inherently risky. There are no guarantees in life and certainly none in homeownership. Do your due diligence with the information available and hope for the best. Look on the bright side, at least we don’t live with the threat of earthquakes.

More Castles in the Sand:

It’s all about the kitchen

Calming waters

The condo dance