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More homes are being built and purchased in flood zones, especially as climate change and rising sea levels shift FEMA flood maps and create newly designated high-risk areas.
Given the start of hurricane season and the terrible situation in Texas, it’s more important than ever for buyers to go in with a clear understanding of what purchasing a home in a flood zone entails.
“Concerns about living in at-risk areas appear to be growing year over year, driven by more frequent and severe natural disasters, rising insurance premiums, and increased public awareness of climate-related risks,” says Jiayi Xu, economist at Realtor.com®.
Still, buying in a flood zone doesn’t have to be a dealbreaker. In fact, some buyers intentionally seek out these properties. However, before taking on that risk, it’s essential to ask a different set of questions and manage expectations accordingly.
Where are the riskiest flood zones—and how many homes are affected?
According to First Street Foundation, the top 10 states with the largest number of homes at severe or extreme flood risk are: Florida (1,098,543), Texas (448,256), Louisiana (386,843), Pennsylvania (316,337), California (293,000), New York (289,046), North Carolina (259,145), New Jersey (228,194), Tennessee (159,378), and Georgia (147,790).
First Street Foundation assigns each area a Factor Score, ranging from 1 to 10. A property’s Flood Factor is an indicator of its comprehensive, 30-year risk of flooding. It goes beyond FEMA flood maps by factoring in rainfall, sea-level rise, high tides, storm surge, and streamflow.
“While FEMA classifies 8.7 million properties as having substantial risk, or within Special Flood Hazard Areas, the First Street Foundation Flood Model identifies nearly 70% more, or 14.6 million properties with the same level of risk,” the foundation said in a press release.
“I’ve had people get excited about a property, but once they find out it’s in a flood zone, they start to hesitate and ask questions,” says real estate agent and investor Ron Myers, of Ron Buys Florida Homes.
“If there’s a history of water damage, I am very upfront with potential buyers and cover this immediately so we have a smooth purchase transaction. But even with good bones and a great location, some people just don’t want to deal with the long-term risk.”
Why homes in flood zones are still in demand
Why do some buyers still pursue flood zone properties, despite the risks?
- Location—Flood zone properties are often on the waterfront, near beaches, or in desirable historic neighborhoods
- Relative affordability—Homes in flood zones may come at a discount (at least up front)
- Short-term vacation rental potential—This is especially true in coastal markets
- Buyer misconceptions—Some assume insurance will cover any major damages and don’t fully assess the financial exposure
Cara Ameer, a real estate agent with Coldwell Banker who operates in both California and Florida, has sold many homes in flood zones.
“It was disclosed upfront what flood zone the property was in, and any surveys or documents relating to that were typically provided,” she says. “I take a very proactive approach, so the buyers aren’t surprised or sticker shocked when it comes to insurance costs. We also look up the address on FEMA and state and local websites. The buyers were okay with it because they were seeking properties on or near a waterway, so they were willing to take the risk in exchange for the upsides of being able to live the beach or boating life.”
However, Ameer has also had buyers back out of a sale because of flood risks, as well.
“I did have buyers who were buying in close proximity to a creek that was known to flood and has had continual issues,” she says. “While the home they were looking at did not have any issues per the seller, they decided it was too much of a risk to take on and pivoted to a different area.”
Questions to ask before buying a home in a flood zone
Interested in a home in a flood zone? Here are questions you should bring to both the seller and their real estate agent, so you can make a fully informed decision.
- What flood zone is the property in, and when was it last assessed?
- What is the current flood insurance premium—and is the policy transferable?
- Has the home ever flooded? If so, how often and what repairs were made?
- What kind of flood mitigation measures, such as sump pumps or elevated electrical, are in place?
- Are there any FEMA grants or state-level incentives for mitigation improvements?
- Will the elevation certificate be made available during the sale?
- Is the home built above base flood elevation?
- Have property taxes changed recently due to flood risk?
You should also find out if flood insurance is required by your lender, and how that impacts the mortgage.
“In areas of the country where flooding is considered high-risk, mortgage lenders will likely require proof of flood insurance,” says Julia Taiesin, insurance data journalist and analyst at Insurify. “But flood insurance is commonly misunderstood, and many homeowners erroneously believe that their standard home insurance policy covers it. Homeowners insurance covers water damage from a burst pipe or leaking appliance, but it doesn’t cover weather-related flood damage. The National Flood Insurance Program and private insurers offer separate flood insurance policies for that.”
According to Joshua Levine, CEO of Capitol Benefits insurance agency, it’s a good idea to obtain the flood insurance quotes first “as they could be the same or more expensive than the homeowners insurance premium,” he warns.
“I always tell buyers to sit down with an insurance agent and go over the fine print before they commit,” says Myers.
It’s also important to talk to your real estate agent about how buying in a flood zone will affect resale value.
“It’s not just about what the house looks like today,” Myers says. “You need to think long-term. What happens if a storm hits again? How easy will it be to resell, and what’s your exit strategy?”
A home inspection can give you valuable insight into flood zone properties. While your home inspector cannot provide official flood zone determinations, they do help homeowners and buyers understand the risks and any evidence of past or potential water issues.
“During a home inspection, we’ll check for signs of past flooding, such as water stains along walls or foundations, musty odors, mold, or rot,” says Reuben Saltzman, owner of Structure Tech Home Inspections. “We also inspect the foundation, walls, and flooring for signs of structural damage that may be related to water intrusion, such as cracks, warping, or settlement. Proper drainage is another key factor: We’ll evaluate the grading around the home, including gutter and downspout extensions, and ensure the landscaping slopes water away from the foundation.”
Myers has bought homes on both Florida coasts that had flood damage, and learned to take a cautious approach.
“There are still good deals out there, but you need to be smart, ask the right questions, and have a plan,” he says. “Whether you are a homeowner or investor, the most successful deals are the ones where you go in with your eyes wide open.”