Today I received a very frantic call from a home buyer set to close this week. The property they are buying is in a flood plain but very unlikely to flood. The flood insurance company had originally quoted her $1,800 per year but had asked her to take some photos of the home for the records. This morning she got an email from them saying the photos were great but the new policy amount would be $4,800 per year. Thinking this must be a typo she called USAA and was told that as of October 1, 2013 FEMA is changing the way they price flood insurance and will no longer be subsidizing some of the policies. She was also told that some of the current policies in effect will be increasing 25% per year for the next few years to offset the cost. When currently subsidized properties are sold the full increase will be felt by new owners.
I did a little research thinking this might be part of the government shutdown hysteria and apparently it's not.
FEMA Won't delay flood insurance increase
Protest against rising flood insurance
This will be very traumatic for folks that currently own homes in a flood zone as well as those trying to sell a home in a flood zone. For my buyers that would be like trying to make up $300 in a payment which would essentially need to cut in half the purchase price of their $130,000 home.
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