How to Close Real Estate Deals During Government Shutdowns

Q: How do I explain the shutdown situation to my clients?

Be direct and solution-focused: 'The government flood program is currently shut down, but we have alternatives. Private flood insurance is available and your lender will accept it. I'm working with a flood insurance specialist who can get you quotes immediately. This won't delay our closing.' Position yourself as the knowledgeable professional who has a plan.

October 8th, 2025

7 min read

By Chris Greene

``` ```

For Real Estate Professionals

Government Shutdowns Don't Have to Kill Your Deals

How the 2022 HUD Rule Changed Everything—And Why Your Competition Doesn't Know About It

Published: October 5, 2025 | Industry Insider Guide

```

The Deal Killer Nobody Talks About (Until It's Too Late)

You've done everything right. Your buyers are pre-approved, the inspection cleared, the appraisal came in. You're three days from closing.

Then the text comes in: "My lender says we need flood insurance, but NFIP is shut down. What do we do?"

If you don't know the answer to this question in 2025, you're about to lose deals to agents who do.

1,400

Daily transactions affected by NFIP shutdowns

40,000

Monthly deals disrupted during lapses

35 days

Longest recent government shutdown (2018-2019)

Your commission if the deal falls apart

What Really Happens During a Government Shutdown

When the government shuts down, the National Flood Insurance Program (NFIP) freezes. Not "slows down." Not "experiences delays." Completely stops.

The Timeline of Chaos:

Existing NFIP policies: Still valid, claims still paid (for now)
Policy renewals: ❌ Frozen. Can't process them.
New policies: ❌ Can't issue them.
Newly mapped properties: ❌ Can't get the special 1-day waiting period.
Your closing: ❌ At risk of delay or cancellation.

⚠️ The Newly Mapped Nightmare

Here's the scenario that kills deals: Your buyer's property gets remapped into a Special Flood Hazard Area. The lender sends a letter: "You have 45 days to obtain flood insurance or we can't close."

Pre-shutdown: NFIP offers 1-day waiting period for newly mapped properties. Easy fix.

During shutdown: NFIP is offline. Zero access. Your buyer is sitting in a high-risk zone with a 45-day deadline and no government option. The lender might grant an exception and waive the requirement temporarily—but that leaves your buyer completely unprotected.

The 2022 Game Changer That Saved an Industry

Here's what most agents still don't know: Everything changed on December 21, 2022.

That's when HUD issued a final rule allowing private flood insurance for FHA-insured mortgages. Before this? FHA, VA, and USDA borrowers were trapped—they could ONLY use NFIP.

Before December 2022:

Government loan buyers had zero alternatives to NFIP
Shutdown = deal death for FHA/VA/USDA transactions
2010 lapse disrupted 40,000+ sales per month
Agents scrambled with extensions and prayers

After December 2022:

FHA/VA/USDA buyers can use private flood insurance
Shutdowns still happen, but deals don't have to die
2025 lapse: disruption minimized because alternatives exist
Smart agents close while competitors scramble

✅ The Bottom Line

The government didn't fix NFIP—they just admitted private insurance was reliable all along. The 2022 HUD rule wasn't innovation. It was acknowledgment that private insurers had proven themselves trustworthy for 20+ years while the government program shut down repeatedly.

Comparison: How This Affects YOUR Transactions

Transaction Scenario	NFIP During Shutdown	Private Insurance	Your Move
FHA buyer, flood zone, 5 days to closing	❌ Unavailable	✅ Available same day	Close on time
Conventional buyer, newly mapped property	❌ Can't get 1-day wait	✅ 15-30 day wait	Start immediately, plan timeline
VA buyer, renewal during shutdown	❌ Can't renew	✅ Write new policy	Switch to private, stay compliant
Existing NFIP policy, assignment to buyer	✅ Can assign during lapse	✅ Can write new	Use whichever is faster/cheaper
Severe Repetitive Loss property	❌ Unavailable	❌ Won't cover SRL	Delay closing or risk going bare

The 20-Year Track Record Your Clients Need to Hear

Here's the objection you'll get: "But isn't government insurance safer? What if the private company leaves?"

Here's your response:

"I understand that concern. Let me share some facts:

In 20 years, zero private flood insurers have abandoned policyholders. Not one.
In those same 20 years, NFIP has shut down multiple times, leaving homeowners unable to get coverage when they needed it.
The longest NFIP lapse disrupted 40,000 home sales in a single month.
Meanwhile, private insurers operated continuously—no shutdowns, no lapses, no political drama.

So which is riskier: a company that might theoretically leave but hasn't in 20 years, or a program that has repeatedly shut you out when you needed it most?"

What to Tell Your Clients (Word-for-Word Scripts)

When NFIP is shut down:

"The government flood program is currently unavailable due to the shutdown, but this won't affect our timeline. Private flood insurance is fully accessible and your lender will accept it. I'm working with a flood insurance specialist who can get you quotes today. We'll be ready for closing."

When they're newly mapped:

"Your property was just mapped into a flood zone, which means we need flood insurance to close. Normally NFIP offers a 1-day waiting period, but they're shut down right now. The good news: private insurance is available and works with your FHA loan. There's a waiting period, so let's get this started immediately to avoid any delays."

When they ask about cost:

"Private flood insurance is less than NFIP about 40% of the time. Especially for newer homes or lower-risk properties. Plus, you can get higher coverage limits. Let's get quotes from both and compare once NFIP is back online. Right now, private is your only option, but it's usually a competitive option."

💡 PRO TIP: Never say "I don't know" or "we'll have to wait." Position yourself as the agent who has solutions. Build relationships with flood insurance specialists NOW so you're not scrambling when shutdowns happen.

The Severe Repetitive Loss Exception

There's one property type where this gets ugly: Severe Repetitive Loss (SRL) properties.

These are homes that have flooded multiple times with significant claims. Private insurers won't touch them—they're NFIP-only.

During a shutdown, SRL properties have zero options:

Can't renew with NFIP (shutdown)
Can't switch to private (won't cover SRL)
Sitting in highest-risk properties with no coverage

Your responsibility: If you're listing or showing SRL properties, disclose this risk upfront. During shutdowns, these deals are extremely difficult to close. Set expectations early.

Your Action Plan: 5 Steps to Shutdown-Proof Your Business

Build Your Network Now
Establish relationships with flood insurance specialists who offer both NFIP and private options. Don't wait for a crisis.
Educate Clients Early
As soon as a property goes under contract, order the flood determination. If flood insurance is required, start the conversation immediately.
Know the 2022 HUD Rule
Memorize this: FHA/VA/USDA can use private flood insurance. This is your shutdown lifeline for government-backed loans.
Check Lender Requirements
Confirm early which flood insurance carriers your buyer's lender accepts. Most accept private insurance that meets federal standards.
Create a Shutdown Protocol
Have a written plan for what you'll do when NFIP shuts down. Who will you call? What's your timeline? Who gets private insurance quotes? Be prepared.

Florida, Texas, Louisiana: Special Considerations

If you're in a high-risk state, this matters even more:

Florida: ~14,870 closings per month affected during shutdowns. Nearly 1.8 million NFIP policies statewide.
Texas: 600,000+ residential policies at risk during shutdowns
Louisiana: High concentration of flood-prone properties, extended shutdown impacts

In these markets, not knowing about private flood insurance alternatives is professional negligence. Your competition is learning this. You need to know it first.

Don't Let Government Dysfunction Cost You Commissions

Download our free guide: "The Real Estate Professional's Flood Insurance Playbook"

Learn how to navigate shutdowns, educate clients, work with lenders, and position yourself as the knowledgeable pro who closes deals when others can't.

Download Free Realtor Guide

The Bottom Line: Trust vs. Track Record

Your clients will ask: "Can we trust private flood insurance?"

Here's what the data shows:

Metric	Private Flood Insurance	NFIP
Times shut down in 20 years	✅ Zero	❌ Multiple lapses
Abandoned policyholders in 20 years	✅ Zero documented cases	N/A (government program)
Available during government shutdowns	✅ Always	❌ Unavailable
Accepted by FHA/VA/USDA lenders	✅ Yes (since Dec 2022)	✅ Yes
Maximum building coverage	✅ Often higher than $250K	$250,000 cap

The verdict is in: Private insurance has proven reliable for 20 years. NFIP shuts down repeatedly. Which would you trust to close your deals?

Final Word: The Agents Who Win

In every market downturn, some agents thrive while others struggle. In every government shutdown, some agents close deals while others watch commissions evaporate.

The difference? Knowledge and preparation.

You now know:

The 2022 HUD rule that changed everything
How to handle newly mapped properties during shutdowns
Why private insurance is often better than NFIP
What to tell clients and lenders
How to position yourself as the knowledgeable professional

When the next shutdown happens—and it will—you'll be the agent who has answers while your competition scrambles.

Your reputation is built on deals that close, not excuses about why they didn't.

Be the agent who closes.

Real Estate Pro FAQs: Flood Insurance & Government Shutdowns

Can my FHA/VA/USDA buyers use private flood insurance during a government shutdown?

Yes. Since December 21, 2022, HUD allows private flood insurance for FHA-insured mortgages. This extends to VA and USDA loans as well. During a shutdown when NFIP is unavailable, private flood insurance is often the only way to keep government-backed loan transactions on track.

How many transactions are affected when NFIP shuts down?

Approximately 1,300-1,400 home sale closings are affected daily during an NFIP lapse, totaling about 40,000 transactions per month. Florida sees the biggest impact with roughly 14,870 closings per month potentially delayed or canceled. However, the 2022 HUD rule allowing private insurance has significantly reduced disruption compared to pre-2022 shutdowns.

What happens if my buyer's property gets newly mapped during a shutdown?

This is the worst-case scenario. The lender requires flood insurance within 45 days, but NFIP (which normally offers a 1-day waiting period for newly mapped properties) is unavailable. Private insurance is accessible but has 15-30 day waiting periods. Many lenders will grant temporary exceptions, but this leaves your buyer exposed. The best strategy is to secure private insurance immediately and explain the situation to the lender.

Will lenders accept private flood insurance policies?

Yes. Federal regulations require lenders to accept private flood insurance that meets specific criteria. Since the 2022 HUD rule, FHA lenders must accept compliant private policies. Conventional, VA, and USDA lenders also accept private flood insurance. The policy must provide coverage at least equal to NFIP standards and be issued by a licensed, state-approved insurer.

How do I explain the shutdown situation to my clients?

Be direct and solution-focused: "The government flood program is currently shut down, but we have alternatives. Private flood insurance is available and your lender will accept it. I'm working with a flood insurance specialist who can get you quotes immediately. This won't delay our closing." Position yourself as the knowledgeable professional who has a plan.

Can I still close during a shutdown if the seller has existing NFIP coverage?

Yes. During an NFIP lapse, sellers can assign their existing policies to buyers. The insurer simply substitutes the buyer's name for the seller's without reissuing the policy. This is one workaround that can keep transactions moving, though buyers may want to shop for their own coverage once the shutdown ends.

What should I tell clients about private flood insurance costs?

Private flood insurance is often comparable to or cheaper than NFIP, especially for lower-risk properties or newer construction. It also offers higher coverage limits (NFIP caps at $250,000 for buildings). The key message: private insurance isn't a more expensive alternative—it's often a better value that happens to be available when NFIP isn't.

How long do government shutdowns typically last?

They vary significantly. The longest recent shutdown was 35 days (December 2018 - January 2019). NFIP lapses have ranged from hours to nearly a month. The 2010 lapse lasted about 30 days and disrupted approximately 40,000 sales. The current 2025 shutdown began September 30. Always have a backup plan ready.

What's the best practice for flood-zone properties in my market?

Build relationships with flood insurance specialists who offer both NFIP and private options. Educate clients early in the transaction about flood requirements. Get flood determinations as soon as properties go under contract. Have private insurance contacts ready before you need them. The agents who close deals during shutdowns are the ones who plan ahead.

```

Chris Greene