House #4: Flood Plain!?

October 28, 2008 · 0 comments

The Yellow Stain House is quickly becoming the bane of my existence…

Okay, it’s not THAT bad, but it’s causing more frustration than I care to have in a house that I don’t yet own. First, there was the foundation issue. Then, there was the major plumbing issues. Now, just 24 hours before I’m supposed to close on the property, I get a call from my lender telling me that the property sits squarely in a Flood Plain, and that unless I get the potential hazard assessed, and get flood insurance, he won’t be able to lend against the property.

For those that have no idea what a flood plain is (I didn’t before today), it’s basically an area around a body of water (river, stream, creek, pond, etc) that has the potential to flood given heavy rain. Many communities are designated flood plains by FEMA, and if your house sits within a flood plain, you are required (at least to get a loan) to have flood insurance.

Now, here’s the interesting part. Just because your house sits in a flood plain doesn’t mean that it is at risk of flooding. Flood plains are defined for large areas, but not every piece of land within that area is at risk. It mostly boils down to the exact elevation and situation of that piece of land relative to the body of water that puts it at risk. So, while The Yellow Stain House sits on a flood plain, it may or may not be susceptible. If it’s not susceptible (and you get a survey performed to prove it), you can have it removed from flood plain requirements; this results in lower insurance and better resale value.

Given that we don’t have a survey of this property, and therefore don’t know the extent of the flood risk, the lender has asked that we put off closing until I can speak with my insurance company. I talked to my insurance company today, and they said that the extra flood protection would run about $600/year. While not too bad by itself, the fact that a new owner would have to pay this annual premium to buy the house means that the resale value is impacted.

So, we are planning to get a survey (or at least a partial survey that had the elevation details), and hopefully if the news is good, we will be able to get the property officially removed from the flood plain. If the news is bad, and the flood risk is high, I may have to back out of this deal, and let the bank keep my earnest money. Most likely, we’ll find that we’re still on the flood plain, but the risk is relatively low, which will hopefully lower the insurance premium (they’ll review the survey and make their own decision) and make resale not too much more difficult.

Anyway, I have a lot to learn over the next couple days about flood plains, and a lot to do to try to position this property as best possible given the current designation of being in a flood plain. I’ll let you know what turns up…

I have a feeling I’ll be posting a lot about The Yellow Stain House this week…

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