New Flood Maps and Insurance Regulations – What do They Mean?

If you’re in the market for buying a home, or thinking about listing your home, take heed:

Expensive changes are coming to FEMA’s flood maps and the federally subsidized flood insurance policies. We’re doing our best to stay abreast of these regulations and how they’re going to affect buyers, sellers, and homeowners, and have started to develop a pretty good understanding of what the changes mean. We’ve assembled our expertise into what we hope is a useful, easy to read update on flood policy.


Why are they doing this?
FEMA’s National Flood Insurance Program has a $24 billion shortfall, thanks in large part to megastorms like Hurricane Katrina, Superstorm Sandy and other major storms in recent years. According to FEMA, many of the flood maps and rate structures were created in the 1970s and 80s, and are in need of updating. The aptly named Biggert-Waters act of 2012 phases out many of the insurance subsidies that have been commonplaces for years.

What does this mean?
Basically, that coastal homeowners whose homes do not meet a certain set of criteria have to bear the actual, full price of flood insurance. And, oh yea, rates are going up!

What exactly is it?
It’s a redrawing of flood maps and a rethinking of flood insurance policies. In the past, flood maps have primarily been used in coastal zones and areas; FEMA has now taken care to include lakes, rivers, streams and ponds that might flood and affect your home. In essence, FEMA has rethought which homes are considered “at-risk.”

This means that changes are twofold:
1.) Homeowners whose homes have always been considered at-risk are going to see their rates spike like crazy. If “at-risk” homeowners do nothing to mitigate, or reduce, the risk of flood damage, their rates will rise by 25% each year until it reaches the full, unsubsidized rate, unless mitigation is undertaken.

2.) Many homeowners that in the past would not have been considered at-risk, are now considered to be at risk, and the same mitigation procedures are recommended.

What does this mean for me?

Homeowners: It depends. We strongly recommend going to town hall or having an engineer come out and give you an official elevation certificate. If your home is considered to be “acceptable” – i.e., a minimum of 3 feet above Base Flood Elevation (the level at which FEMA anticipates floodwaters will rise), not much changes. Your rates will stay about the same. If your home is “at risk” or “at base flood elevation,” your rates are going up, up, up. Until you mitigate the risk by one of FEMA’s recommended methods, none of which are cheap, your rates will rise by 25% each year, until it reaches the full unsubsidized rate.

Sellers: If your home is considered to be “at-risk,” when you sell your home the buyer is required to pay the full unsubsidized rate. Though you may be grandfathered in, the buyer is not eligible for that grandfathered rate. Flood insurance, which is required, can now cost as much as $20,000 per year. This means that buyers may ask you to mitigate the rate, pay for a surveyor, or might not buy the house at all. Your home might now be much more difficult to sell, or, realistically speaking, not sellable at all. If you’re considering selling in a few months or a few years, make the recommended renovations. It will increase the sale value of your home, and will lower the insurance premiums that your future buyer will pay. Making it even more confusing, some properties just might be eligible to sell with the grandfathered rate, until the next map change.

Buyers: Do. Your. Research. Hire a good agent that knows the neighborhood and can make solid recommendations on what to do. If you’re looking at an older waterfront listing that you were considering extensively renovating or even tearing down, that might now be your best option. Before you make an offer, visit town hall and look at the flood maps. Seriously consider if you can afford to pay the new, very high insurance premiums, on top of the purchase price for the house. Make absolutely sure that you get an elevation certificate, and work with the seller on getting a good engineer to do the work.

So is there any good news? 

Well, yes actually. According to FEMA Director Craig Fugate, more than 80% of the homes already covered by the program meet risk mitigation standards and will not see a major change in rates. But this isn’t 100% true, as risk might go up when new maps are unveiled.  

Keep in mind that many homes have been added to flood maps, and it’s best to adhere to the following three steps:

1.) Do your research

2.) Obtain an elevation certificate 

3.) Be up front and honest about your insurance costs with potential buyers

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