Flood zones becoming an important criteria for home buyers
I'd like to say I was clever and did all the right research when I bought a home in the Charleston region in 2004, but in one respect I just got lucky.
It hadn't occurred to me to look at a flood zone map before I signed the papers, as it isn't adjacent to a river or marsh, and it's sure not at the beach.
Turns out I happened to buy a house on high ground, outside the 500-year flood plain, so I'm not required to have flood insurance (although flood insurance can be a good idea even when it's not required).
Within dog-walking distance of my house, there are homes in my neighborhood that are in flood zones, on streets that can become impassable when there's a heavy storm at high tide.
All of them can expect to see much higher bills for flood insurance.
These days, I wouldn't consider putting an offer on a home without first checking the flood zone maps. The federal government is remaking the National Flood Insurance Program, and premiums are poised to soar for some properties.
The changes followed a rare moment of bipartisan agreement on Capitol Hill that came in 2012, when the flood program had accrued a $20 billion deficit due to subsidized premiums and high claims.
The real estate industry is pushing hard to get the increases postponed, maybe for four years, but at some point people are going to be paying a lot more than they might expect if they live in a flood zone. Considering that about half the development in the Charleston region in recent years took place in the flood plain, that's a lot of properties locally.
Of course, if someone buys a home on a barrier island, or at the water's edge on a marsh or river, they should know they're almost certainly going to need flood insurance. But in other cases, you might find similar homes with similar prices, in a community where some areas are flood-prone and others are not.
As flood insurance premiums rise, homeowners who are required to have flood coverage are going to face higher expenses, and at some point that's going to be reflected in the value of their homes.
It's reasonable to assume that if one house requires flood insurance that substantially increases the cost of ownership, while a comparable house does not, the prices of those homes will eventually reflect that disparity.
The Post and Courier already has reported on some home sales that fell through, or nearly did, when the buyers learned what the repriced flood insurance would cost. One buyer on the Isle of Palms learned the insurance would cost $9,500 yearly, rather than the $2,500 the seller had been paying.
If you're a buyer, you should be anticipating this sort of rate shock if you buy a home in a higher risk area. Ideally, you would want to know the property's flood risk before making an offer.
That's not quite as easy as it sounds, because flood maps are also being redrawn, but the existing maps can at least tell you the historic risk. You can look them up online at floodsmart.gov.
Flood insurance rates are going to rise to represent the true cost of insurance, with phased-in rate hikes for some properties, such as older homes that don't change ownership, and immediate and potentially large hikes for properties that are sold.
Of course, this comes at a time when wind-and-hail rates for hurricane coverage also have been rising fast. If home buyers don't know what they're getting into, they might learn after making an offer that insurance costs would make their monthly mortgage payments much higher than expected.
Unlike homeowners' insurance, which all mortgage lenders require, flood insurance is an additional policy backed by the federal government, which lenders will require only if you live in a flood zone.
You can choose to buy flood insurance if you don't live in a flood zone, and in those cases it's not very costly.
So, add flood zones to the list when you're shopping for a home. It's one more reason why, as they say, the three most important things in real estate are location, location and location.
Reach David Slade at 937-5552