After the devastating impacts of Hurricane Katrina and Super Storm Sandy, FEMA — the Federal Emergency Management Agency — felt it necessary to expand the flood zones. This ensured areas that might have fallen out of range of normal flooding are now covered due to the widespread damage from previous storms.
This expansion has had a serious and wide-sweeping effect for homeowners and businesses alike and increased the number of residences in a flood zone from around 8,000 to over 18,000, comprising over 4,000 businesses.
Real estate agents and insurance agents are aware of the high cost of flood insurance; however, it is incumbent that this information is passed on to potential buyers as it can have a serious effect on their buying power and their bottom line.
As a real estate professional, it’s in your and your client’s best interest to ensure you are aware of the most up-to-date flood zones for any property you are currently marketing.
Current real estate owners and prospective buyers have been challenged by these changes. Staying ahead of these changes and remaining fully aware of the current flood zones will prevent trouble at closing due to additional costs.
A good practice to help you stay ahead of the game is to have flood certifications run on any new properties you are getting ready to put under contract. A decent insurance agency can do this for you, so establishing relationships with local agents can prove very helpful.
Another factor your insurance partner can help you with is considering the type of coverage that might be required. For example, you might only want to cover the building itself and not the contents, or if your clients feel comfortable the property will not flood, they can carry a higher deductible, and this can help lower their premiums.
Lenders play a part in this process as they will produce the Standard Flood Hazard Determination Form (SFHDF), also known as the flood zone determination. Sometimes there are cases when the SFHDF differs from what is on the insurance policy.
When this happens, FEMA recommends using the more hazardous flood zone when determining the rating. Coordinating with your insurance partners can prove invaluable because they can also see if the property qualifies for the NFIP Grandfather Rules or the Two-Year Preferred Risk Policy Extension (PRP).
Contesting flood zones
Flood zones can be contested; however, it takes time and quite a bit of money, and there is a specific process that must be followed.
When FEMA went out to set the flood zones, they utilized what is known as BFE, which is short for base flood elevation. Any property that is below the BFE is considered to be in a flood zone while any property that is above the BFE is not.
The first step when disputing a property is to hire a licensed surveyor and preferably one with flood zone experience. The surveyor will determine the property’s elevation in relationship to the BFE. If they find the property to be above the BFE, it’s OK to go ahead with the appeal.
The next step is to go to the FEMA website and print out the Application Form for Single Residential Lot or Structure Amendments to National Flood Insurance Program (NFIP) Maps. It’s also known as the MT-EZ form.
This form needs to be filled out and signed by the property owner and the surveyor and sent to FEMA. FEMA might also ask for other documentation. Once again, this can prove to be quite costly and time-consuming, and it puts a stamp on how important it is that potential buyers have the most up-to-date floodplain determination to make the best-informed decisions.
In the end, it is the strong, positive relationship that we maintain with one another — lender, agent and Realtor alike — that determines how successfully we serve our customers.
Matt Naimoli is a partner at G&N Insurance.