What to Tell Buyers When Looking in a Flood Zone

Industry Observer with ValuePenguin

To say it’s been wet in Maryland is a bit of an understatement. In 2018, Baltimore experienced its wettest year on record, with nearly 72 inches of rain falling on Mobtown. Last year’s rain totals were almost double the average for Baltimore, and it appears 2019 is ready to continue that trend.


Some climate researchers believe what we’re seeing is a new normal for states in this region. A report from the Union of Concerned Scientists finds that storms producing heavy rainfall have been and will continue to increase in frequency. The report also states that more flooding is an ultimate result of this change in climate.


It’s also becoming more important than ever for agents to discuss flood insurance with home buyers, as there is risk present for those areas outside traditionally mapped flood zones.

How to help buyers with Maryland flood insurance

As a real estate agent, you may be in a position to provide some much-needed assistance to potential homebuyers.

1. Explain the risks associated with flooding

A good starting point is to help homebuyers understand why flooding is a risk. Experienced homebuyers may already understand this risk, but this could be a valuable discussion for first-time homebuyers. Some areas you may want to cover include the increasing risk of floods in Maryland, the cost to repair flood damage to repair flood damage and health-related issues that can exist even after repairs are made, such as mold.

2. Point out that homeowners insurance does not cover flood damage

Even though they are investing in home insurance, which in Maryland averages $1,236 annually, homeowners still leave themselves open to risk as the amount of rain becomes more common. This misconception is often a problem for both new and experienced homebuyers. Part of the flood insurance discussion should involve the gap in coverage that exists with homeowners insurance. Even if potential buyers fail to purchase flood insurance, you may leave them with a much better understanding of their insurance needs (and a more positive impression of yourself).


As the risk of flooding increases in Maryland, real estate agent should consider making flood insurance part of the discussion. Homebuyers are still largely resistant to the added cost, but there’s a good reason to believe buyers will be more open to the discussion in coming years. 


3. Elaborate on the low cost of flood insurance for Maryland


According to the Federal Emergency Management Agency (FEMA), just 1 inch of water can result in more than $26,000 in loss potential; a way to mitigate that loss is to invest in flood insurance. In Maryland, annual flood insurance will only cost you around $573 annually, which is one of the lowest nationwide. Still, only 4.5% of Maryland homeworners invest in flood insurance protection. 


Some Maryland buyers are required to purchase flood insurance

Many homebuyers understand their requirement to purchase homeowners insurance. However, if you have buyers purchasing a home in a flood zone, there may be some legal requirements that exist for both the buyer and the lender.


According to the Baltimore Office of Sustainability, lenders who make any type of federally-backed loan (such as a Federal Housing Administration loan) must determine whether the home is located in a Special Flood Hazard Area (SFHA). If the home is indeed in an SFHA, the homeowner must purchase flood insurance, with the rate determined by the most recently updated version of the FEMA Flood Insurance Rate Map (FIRM).


If you’re a lender, you’re legally required to inform potential homebuyers of this insurance requirement. However, if you’re the seller or the real estate agent, you may not have this obligation. That said, it’s important to remember the NAR Code of Ethics:


“REALTORS ® shall avoid exaggeration, misrepresentation, or concealment of pertinent facts relating to the property or the transaction.”


If the potential homebuyers are required to purchase flood insurance, their lender should have already informed them. But it may be good practice to ask potential buyers whether they’re already familiar with this requirement. If not, you may find it valuable as the agent or seller to be as transparent as possible to your potential buyers. Not only is that kind of transparency important for the buyer, but it can also go a long way to creating the kind of trust that results in getting positive word-of-mouth advertising down the road.


Beyond that, if the home was previously flooded, you are required to disclose any flood damage that exists in the home. As with flood insurance, if repairs have already been made and there are no remaining issues related to flood damage, you aren’t legally obligated to disclose this information, but it may still be in your benefit to do so.




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Joe Resendiz

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