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Do you know your flood zones?

By Eric Bornstein

Real Estate Agent with Appleseed Realty GMAC

February 27, 2008 11:27 AM

Recently had a bad experience with a sale gone sour because of a flood zone issue. Prospective buyer found out (before entering into contract) that because of the flood zone designation,her flood insurance cost would be an additional $ 1900. After many inquiries with different insurance companies the buyer decided to drop the offer and will look in areas that are clearly designated as non flood zones. Has anybody have any input or experiences they can share on this matter. Thank-you

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John Walters

Frank Rubi Real Estate - Slidell, LA

Licensed in Louisiana

Trust me I know mine after hurricane Katrina. Boy do I know them.

Feb 27, 2008 11:31 AM

Jay Knorr

Prudential Preferred Real Estate - Auburn, AL

Auburn Al Properties

I had a deal go south a while back because of the same problem...DANG FLOOD ZONE. In my case, it was only a lot, no stucture involved. The particular property in question was 3 acres and only a 1/2 acre was in a flood zone on the back of the property!

flood This was disclosed by the seller and the seller's agent on the MLS. No problem. My buyer was going to build on the front of the property. (Side note: We don't EVER get enough rain in Southeast Alabama that would flood this pitiful excuse for a creek that touches the back side of this property.) So we make an offer with considerable earnest money. However, LIKE AN IDIOT, I let my out-of-town buyer leave without giving me the check they wrote for the earnest money. Remember that, as it will come into play later.

So, the offer is accepted, and we had no contingency on financing. Didn't think we needed the contingency because the lot was less than $100,000 and they were spending a considerable amount more with the builder and had all of their financing to above normal conditions. Well, we had to get a perk test because the lot was out in the county. Perked fine, but all of a sudden, the lender calls me about this flood zone issue. I was like, "There's only a flood zone on the BACK of the property. Nowhere NEAR where the house will be built." The lender waited a couple of days and called me to tell me that my buyers could NOT purchase the property as the high flood insurance pushed them over the edge and they just couldn't afford it with the house that they were getting.

I called the other agent to tell her and she, after informing her seller, came back and said that we had a contract with no contingencies, and that they were expecting us at the closing table a week later. She also asked me why I hadn't delivered the earnest money check.

To make a long story short, I had to write a check to the seller for the amount of the earnest money as a penalty. After all my bickering with the buyer, and after 20 phone calls and a lot of frustration, I lost 'em. The buyer ended up using another agent and bought a lot not far down the road with no flood zone issues. But I can honestly say I learned a whole lot off of this disaster. No more flood zones for me, always have contingencies even when I don't think they're needed, and ALWAYS get the earnest money check. Now, because of the jack asses that made me write a check, I add an addendum that says my buyer will get their earnest money back if the contract isn't executed.

Feb 27, 2008 11:56 AM