Welcome to the second part of our two-parter blog on real estate and flood insurance in Alabama. We've covered the things you need to know as a realtor when it comes to buying a house or a property for a potential buyer. You can read our blog about it by clicking here.

In today's blog, we want to talk about the other side of the coin and note some important things to keep in mind when selling a house.

Regardless of whether you're the homeowner or just a real estate agent, you should be aware of these things when it comes to flood insurance, flood zones, and what impacts they have on properties in Alabama.

List of Flood Claims

We've already mentioned in our previous blog that it's important to have a basic, if not in-depth, awareness of the history of flood insurance claims made on a property. This way, as a buyer, you get to find proper expectations when it comes to your flood insurance policy and its respective premium.

On the other hand, if you're the one selling the property, this goes the same. It's common courtesy for your potential buyers to be given an idea of where the current flood insurance stands especially when it comes to claims. This also gives a substantial idea of the flooding history as well. For some states, information like this is federally required to be disclosed to a buyer before closing a deal.

This can be done by requesting a list of the claims made through your insurance carrier. Retrieving claims history is a very easy process for both federal and private flood insurance. This list of claims can be requested or ordered from the National Flood Insurance Program (NFIP) and Federal Emergency Management Agency (FEMA).

On the other hand, private insurance companies will have to be contacted by you or your real estate agent to get this list firsthand. It's important to note that the flood claims history on a property may not be readily available when you order it from private flood insurance, so it's important to keep tabs on your claims history.

Policy Assumption

One of the key things to know when it comes to the seller-side is mostly on the policy itself. You see, you don't really have to cancel your policy once you have sold the house, it can remain and be passed on to the new owner. This option of transferring the currently active policy to the new owner (buyer) is called policy assumption.

A policy assumption or policy transfer can help you keep the current flood premium and lower-risk flood zone which in turn will also help you avoid those expensive premiums within that period. You also won't have to pay for the flood insurance premium that the policy also has – this can be discussed between you and the seller.

 

This way, you can make sure that you have proper protection for the new house you're buying without emptying your wallet or bank account. The policy contract will be transferred to you and you'll be the new policyholder in the eyes of FEMA once the reinsurance or renewal day kicks in.

Policy assumption or transfer in your flood insurance can really help you out if you're mapped into high-risk zones in FEMA's flood map or the flood insurance rate map (FIRM). Now, when it comes to properties or houses in that high-risk flood zones, you have to keep in mind that your mortgage lender will be very keen on requiring you to carry a policy for that property.

This mandatory flood insurance purchase can cause a hefty price since we're talking about a lot of flood insurance requirements to be secured before you can get a flood policy for the property.

So other than the higher risk of flooding, you also face a higher risk of emptying your wallet because your mortgage company really needs you to carry flood insurance for your property.

Impacts of Recent Flooding

One of the things you always have to consider when selling a house is recent natural disasters. The most common one is flooding and considering that we're already emphasizing the importance of flood claims which is a direct indication that the house has a chance of flooding.

Recent flooding, most especially, will be a key factor in selling your house and we believe the biggest concern is how much protection does your house has against flood damage and flood loss. It's important to always keep your flood mitigation measures in check in order to have a better chance of selling your home.

Equally, FEMA is also very heavy on flood frequency when it comes to flood insurance rates. The new Risk Rating 2.0, launched on April 1st and October 1st of last year, changed the rating structure for the federal flood insurance.

One of the flood risk variables being considered by FEMA and the NFIP when rating your property's flood insurance policy is both how often the insured building gets flooded and what type of flooding it experiences. This can take a very hard hit for your selling strategy as most buyers would shy away from flood-prone houses.

As a realtor, it's important that you are aware of this as well, if not an expert when it comes to it. A lot of potential buyers get frustrated when they get surprised about this requirement, so as a realtor it's best you let them know ahead of time.

When it comes to selling properties, you really want to help your buyer consider what the flood risk is and the chance of flooding. Some states like Texas actually require realtors and sellers to fully disclose the flood history and claims on a property, but regardless it wouldn't really hurt being transparent about these things. After all, we're talking about the safety of someone moving into a residential property.

If you've got any questions on a flood policy, the flood zone status of the property you're looking to buy, how the floodplain impacts flood zones, or anything related to floods, click below to go to our Flood Learning Center where we try to answer these questions.

You can also call us if you need a second opinion from a flood insurance agent when it comes to your purchase of a property by clicking below.

Remember, we have an educational background in flood mitigation which lets us help you understand your flood risks, flood insurance, real estate selling and buying, and mitigating your property's value long-term.

Alabama is no stranger to flooding. Be this due to consistent rainfall to hurricanes making landfall near the state, almost throughout every year, Alabama will be a victim of this type of natural disaster.

Today, we want to do a deep dive into why flooding is very common in the state and discuss the three most common flood zones in The Heart of Dixie state.

Lookback on Alabama Floods

The state is no stranger to floods especially due to flash flooding. Most of the counties in the state face flood as one of the biggest challenges from heavy rains to tropical storms passing by.

Despite having only one named storm in the last quarter of this year, it doesn't mean everything will be calm. We're still seeing a lot of rainfall and persistent precipitations across the country. In most cases, these conditions are enough to cause enough flooding and damage to multiple areas.

Take note, this is without a tropical storm present and at the most extreme caused by monsoons. Why is this happening you might ask?

We can owe it to what's called the La Niña. La Niña is a "cold event" wherein trade winds are stronger than usual which pushes more warm water toward Asia. Being the exact opposite of El Niño which is commonly known as the "heat event" that leads to week-to-month long droughts in South America and California, La Niña is a mixed bag of weather conditions that are very unpredictable and usually exceed the expectations.

This generally causes some areas of the United States to be very dry while some get very wet. To give an example, 80% of Stanislaus County in California is experiencing very extreme to exceptional drought hence the "very dry" conditions. Add this to the already dried-up ecosystem due to the wildfires, it's no question why the drought continues in the state. However, it's equally important to note that these types of events may just be scratching the surface when it comes to the dangers it presents to locals.

On the other hand, if we look at areas like Washington, a lot of atmospheric river impacts are being felt due to La Niña hence causing floods in the area up to the northwestern regions even in British Columbia. We've also seen how the shift from having warm surface water to a much colder one impacts the weather in areas like Northern California. The northern part of the state recently had to face devastating damages due to atmospheric rivers causing an extreme rain event in the area.

These are just a few of the examples we're seeing in the past few weeks however this doesn't mean that everything ends there. We can still expect more effects of the "small girl" as we end the year and go through the winter season.

Most Common Zones in Alabama

There are three most common flood zones we see the cover of the households in Alabama, these are Flood Zone X, Flood Zone A, and Flood Zone AE.

Other than the letters you might be wondering how these flood zones differ, so we'll discuss that

Flood Zone X

If your property is "not in a flood zone" then you're most likely to be in a flood zone X. Generally this zone has the lowest flood risk due to its relative distance to floodplains where flooding commonly starts. This simply means that flood insurance generally isn't required since the probability of a flood or risk of flooding, and impact a building or property in such zones is much lower than other flood zones.

Keep in mind that we're talking about a low-risk zone and not a no-risk zone. This is generally due to flash floods being more commonly experienced by flood zone X which causes significant flood insurance losses due to the damages.

Some mortgage and/or insurance carriers would also call these preferred flood zones. This is called a preferred zone since it has more favorable rates for the homeowner and risks for the insurance carrier. Even with FEMA, being in a low-risk zone brings a lot of good things because Flood Zone X has lower rates even in flood-prone Alabama. 

As we move into Risk Rating 2.0 where flood zones don't impact flood insurance rates, if your property sits on a Flood Zone X, you won't be required to carry flood insurance. However, it's important to remember that 30% of flood insurance claims do come from the homes in Flood Zone X.

Flood Zone A

Let's say you move into someplace else and the property or building is marked as moderate to high-risk flood zones.  Flood insurance is mandatory in areas under Flood Zone A on a property(s) with a mortgage or any additional interests in the property or building.

Generally, this zone falls outside of the preferred zones due to higher changes and flood risk overall. In FEMA's legacy program, this is where you'd start seeing some significant increase in the rates of your flood insurance policy. 

Another important thing you should remember about Flood Zone A is that its base flood elevation isn't determined yet many times. This makes it a challenge for flood zone changes and flood maps since there's no assurance where the base flood elevation starts. You might wake up one day with your kid's teddy bear soaked under 3-feet of floodwater... or maybe not.

 

In this case, do keep in mind that when someone tells you to give your house an elevation certificate or you need flood vents for your home, you should always think carefully multiple times if you're standing on Flood Zone A; you wouldn't want your wallet drained of money.

In regards to Risk Rating 2.0, flood zone A simply means that you will be required by your mortgage or FEMA to carry flood insurance on your property. However, being in a higher-risk zone will no longer cause an increase or any impact on your premium rates.

Flood Zone AE

Lastly, the area where lifeboats should also be considered a necessity. All jokes aside, this zone has the highest risk when it comes to flood zones outside of the coasts and is also known as a 100-year flood zone.  Since Flood Zone AE has a 0.2% to 1%  flood threat at any given month and/or year as it's getting closer to the coast.

Unlike the previous high-risk zone, most properties in the AE zone have determined base flood zones. This is also why it's a higher-risk zone compared to the A zone. Due to this, FEMA and other floodplain management agree that certain conditions can be enough to cause small floods, flash flooding, or widespread floods in that area.

Like Flood Zone A, this zone also requires and mandates that a property must have flood insurance in place especially when there's a mortgage and/or any additional interests.

You don't have to worry since you have options in getting your flood insurance to secure your property values: the National Flood Insurance Program (NFIP) or through the private market (private flood insurance). 

Not being aware that you're moving into a special flood hazard area can cause an immeasurable headache for your bank as flood insurance will be required no matter what, and when someone tells you to give your house an elevation certificate, you should probably consider getting one with some flood vents if possible as this can help lower your rates even in Risk Rating 2.0.

Despite removing flood zones as a basis of rating in Risk Rating 2.0, flood mitigations like installing flood vents, securing elevation certificates, elevating your home, and other mitigation efforts are appreciated and will bring you enough decrease to make that FEMA rating easier to manage.

Flood Insurance Guru: Alabama

For this part, we really want to share our experiences serving homeowners and business owners alike when it comes to the residential or commercial properties they want to protect from flood damage and flood loss.

Looking at our data over at Flood Insurance Guru, about 25% of the flood policies we were able to handle in Alabama are currently zoned in Flood Zone X. However, considering that there is impactful development when it comes to the behavior of water and frequency of runoff and flash floods, even low-risk zones aren't really that safe from flooding.

On the other hand, about 21.2% of the policies we have for Alabama are in Flood Zone A. This can be very alarming, if this number rings true to all properties in the state, as homeowners and floodplain management don't really have a clear insight when it comes to the base flood elevation for at least 20% of the properties across the state.

Lastly, in our database for the customers, we have from Alabama. At least 53.7% are mapped into Flood Zone AE. When it comes to floods, this means that more than half of the properties in Alabama have identified base flood elevation and also are more flood-prone due to possible floodplain devolvement.

As you can see, most of the properties in Alabama are in a flood zone. Regardless of being in a Flood Zone X, A, or AE, properties will still get flooded. Basically, saying that a house is "not in a flood zone" is a myth. We want to raise awareness for these types of things especially since flood insurance is something that you really don't have included in any other insurance.

If you have questions on your flood zone in Alabama,  what are your flood insurance options in the state, or anything related to flood and insurance, click the links below to reach us. You can also access our Flood Learning Center by clicking its graphic below.

Remember, we have an educational background in flood mitigation which lets us help you understand your flood risks, flood zone, flood insurance, and protecting your property's value long-term.

We're less than a month away from the first phase of the flood insurance changes coming to the Federal Emergency Management Agency (FEMA) and the National Flood Insurance Program (NFIP) through the new Risk Rating 2.0 program.

October 1st marks the first massive change coming to federal flood insurance for homeowners across the United States in thirty years, and this also means that a lot of people will be affected outside of the flood industry.

Will the NFIP Risk Rating 2.0 program kill the real estate industry?

Understanding NFIP 2.0

The new program from the National Flood Insurance Program (NFIP) is sure to change the flow in the flood insurance industry overall as this will have a lot of changes that focus on individual flood risks. We've talked about this in our NFIP 2.0 Series per State and Counties, but we'd like to review it to further contextualize its impact on real estate.

The biggest change coming to federal flood insurance is the scoring that comes into the flood risks per property. Simply put this "flood risk score" will take into multiple variables that accurately represent the flood risk of a property — regardless of it being residential or commercial property. This score will be based on some features that are staying and new features.

The remaining features are as follows:

• Zone designation in the flood maps (e.g. special flood hazard areas (SFHA) or preferred flood zones) however flood insurance rate maps will only be used from a regulatory standpoint, not rating.
• Distance to a body of water such as a river, lake, or even the coastline
• Prior flood insurance claims or flood claims made with the property
• Policy assumption and grandfather rule

The new things that will come with the Risk Rating 2.0 are as follows:

• Types of flooding that your property experience. This can be either pluvial or the accumulated water due to rain, runoff; fluvial or river floods; or coastal which are due to storm surge or coastal erosion. Sometimes even a combination of these three.
• First-floor height and elevation of the structure. A new feature that determines your flood risk score is the distance between the ground (grade) from your first floor or the first habitable floor of your property.
• Flood Risk Mitigation Measures made on the property. Is the lowest floor above the base flood elevation? Are there enough flood openings to let floodwaters through?

So how will this impact the real estate industry and will Risk Rating 2.0 be able to completely kill off sales for real estate agents?

The Real Estate Impacts

As you would notice, we immediately mentioned that flood insurance will no longer be rated based on the flood zone. Simply put, this will only determine whether or not a property will be required to process a mandatory flood insurance purchase based on its flood zone.

For everyone's information, if you're in a high-risk area like flood zone A, flood zone AE, or flood zone V, your mortgage will be sure to require you to get flood insurance.

This is due to the regulation set by FEMA and the NFIP for every property. Mortgage-wise this is to best protect their assets which is the structure of the building itself and ensure that reselling it will be a smooth breeze.

Flood Zone for All

At the current program, flood zones directly impact your flood insurance premiums as well. People who are in the high-risk flood zones get significantly higher rates than low-risk zones (like Flood Zone X). This also means that if you're paying for $1000 flood insurance, that's an additional $30,000 on a 30-year mortgage.

Most of the time, you can hear from agents or mortgage lenders that you're not in a flood zone when you're just in a low-risk flood zone. They really don't mention this until an escrow because low-risk zones aren't required to get flood insurance. High-risk areas, on the other hand, will immediately get notified about their mandatory flood insurance requirement by the mortgage company.

It's factual that both of these properties can get flooded equally given the right circumstances like Hurricane Katrina and Hurricane Ida recently.

With the Risk Rating 2.0, this "not in a flood zone" misconception in flood insurance from property owners, agents, and lenders alike will be eliminated since each property will have its individual risk of flooding. Basically, all properties will experience flood one way or the other regardless of the flood zone.

This type of change is the first blow to the real estate market since it might discourage a lot of property owners to buy a property. It comes down to the question "will I be able to resell my house?" when all properties have flood risks.

Mortgage and Flood Insurance Policies

When it comes to sales of properties, one of the biggest concerns for buyers is affordability especially when you put in that mortgage, homeowner's insurance, and flood insurance. With the Risk Rating 2.0, the goal is to make more people be aware of their actual risk and convince them to secure flood policies for their homes.

When you take a mortgage out on a home, you'll have a secret escrow in form of these insurance policies. This means that moving into a new property will also get you a possibly more expensive loan and payment each month since you will get a more accurate representation of the flood coverage due to your risks.

It's important to remember that when you have a flood insurance policy in place, it will be a separate payment from the homeowner's insurance or the mortgage loan per month. The thing is, you can't really escape floods as we've seen with Hurricane Ida in New York, so getting flood insurance is a must to protect your personal property or contents as well as your entire home.

This might cause an effect where people will rather do measures to better protect their own house instead of buying a new one. The chance of people having cheaper homes to get more security when it comes to floods might also go up.

Best Steps Forward

The real estate won't absolutely be killed off by the new Risk Rating 2.0 program since a lot of people will still buy or sell houses. However, it's more likely that the industry will either have to strategize with this new program or get massively hurt by it.

At the end of the day, this new program isn't just for the sake of creating more problems other than the threat of being in a flood plain or waters rushing to inundate your property. This is equity in action for a reason since flood insurance is somewhat getting ignored to the point that it becomes detrimental to one's investments and homes.

We've seen how Hurricane Ida showed that flood zones aren't really the safeguard from flooding since water will never know where and when to stop. New York saw a lot of homeowners clueless on the steps forward to recover from the damages.

The best thing to do is to really think hard about selling or buying a house since it will also include flood insurance one way or the other. Regardless of flood zones, every home will get to see their flood risks and the scores won't be zero.

If you have questions on how to best approach real estate with the Risk Rating 2.0, how to get flood insurance, and how to see your flood risk scores even before the new program kicks in, click below to reach us.

Remember, we have an educational background in flood mitigation which lets us help you understand your flood insurance, your flood insurance, and mitigating your property long-term.

When it comes to flood insurance, once you're exposed to it you also start to encounter one of the most prevalent terms in the industry: flood zone.

Many property owners would say that they're not in a flood zone because either their real estate agent, mortgage, or insurance agent would tell them so, but are you really not in a flood zone?

Flood Zone

First, let's go over what a flood zone is. The Federal Emergency Management Agency (FEMA) who manages the National Flood Insurance Program (NFIP) or the federal flood insurance would define flood zones as an area with a specific type of flood risk according to geographical and historical data.

It's important to note that, generally, all flood insurance companies depend on FEMA's words when it comes to flood insurance. The data is dependent on floodplain devolvement in that area, floodplain status, proximity to a body of water like creeks, lakes, or rivers, history of flooding, the chance of flooding, and things like that to create an output that what we call a flood map or Flood Insurance Rate Map (FIRM).

A flood map of an area or community can show multiple flood zones since it depends on the flood risks that this area faces. These zones can range from low-risk flood zones to high-risk flood zones or special flood hazard areas (SFHA).

Now, what does it mean when people start saying that they're not in a flood zone?

Not in a Flood Zone?

When it comes to flood zones and flood insurance rate map (FIRM), there's no such thing as not being in a flood zone. This is a common misconception that people can get because, truth be told, every house, building, and property actually sits in a flood zone. It just depends on what type of flood zone you're in.

You see, when people say that they're not in a flood zone, this generally means that the property is not sitting in the special flood hazard area (SFHA). When it comes to the Federal Emergency Management Agency (FEMA), every house has a flood zone designation.

Most likely, when your mortgage or agent tells you that the house is not in a flood zone, what they meant is that you don't have to go face a mandatory flood insurance purchase because it's not in a 100-year flood zone.

Examples of a 100-year flood zone are flood zones A (flood zone A, flood zone AE,  flood zone AH, flood zone AR, flood zone AO) or even a flood zone V which is the coastal flood zone.

What this probably means is that when it comes to flood zone maps, the property is sitting on a flood zone C, flood zone B, or even flood zone D. Most likely, this may show up as a flood zone X and the reason why they say that you're not in a flood zone is that your flood insurance won't be required since you're in low-risk flood areas.

The Problem with Low-Risk Flood Areas

Now, it's easy to find peace of mind when you realize that you're in a low-risk flood zone where the requirement for flood insurance isn't really there at all. The problem with these zones is that 30% of the flood insurance claims come from this area according to FEMA and the National Flood Insurance Program (NFIP). Homeowners that say that they're not in a flood zone are the ones that comprise that 30% and we're only talking about FEMA's numbers.

Being in a low-risk flood zone doesn't really mean that you won't get flooded like the high-risk flood zone. There might be minimal flood hazards in the area which is why it shows that you're in these zones, but there are varying reasons why a property owner in a flood zone X can be flooded.

We've also seen low-risk zones get flooding damage due to flash floods and other severe floods throughout the year.

This is why we encourage everyone to secure flood insurance policies for their residential property or even commercial flood insurance for their business. The chances of flooding can be very low one day then skyrocket the other day, given the right circumstances. 

So when you hear someone tell you that you are not in a flood zone or they are not in a flood zone, take time to reach out to your local floodplain management standards and officials or your insurance agent to really identify what your flood zone is. It's better to be safe than sorry when the risk for flooding becomes too high and loss from flood damage becomes too unbearable.

If you have any questions on flood zones, maybe you want to know what flood zone you're in, what your flood insurance options are, or anything about a flood. Reach out to us through the links below.

Remember, we have an educational background in flood mitigation and we want to help you understand flood risks, your flood insurance, and mitigating your property long term.