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.
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.