Dear Real Estate Adviser,
We recently bought a home in a flood plain. The prior owner pulled a permit to raise it but ultimately didn’t comply with the elevation requirements. The house remains two feet too low. Under these circumstances, who is responsible for the repair?
— Nelly W.
I’m afraid you are responsible. That is, unless the seller claimed in his disclosure that he had raised the property and didn’t, which isn’t likely or you would have mentioned it.
Falling levels of good intentions
The old owner may have intended to have the property raised to the minimum elevation needed to get federally subsidized flood insurance, but became scared off by the cost of the project after obtaining the necessary permit. Then, I further speculate, he decided to sell (to lucky you).
A surge of expenses
In case you haven’t researched the cost of elevating a home even a few feet to reach the FEMA Advisory Base Flood Elevation, or ABFE, mark, the service can range from $20,000 to $50,000, depending on the home’s location, foundation and shape and size, say professional raisers.
What about flood insurance?
I’m surprised the seller’s inaction didn’t quickly become apparent to you because most lenders require borrowers to buy flood insurance in addition to homeowners insurance as a mortgage condition for a home in a flood plain. Perhaps you paid cash? (As you likely know by now, most homeowners policies don’t cover flood damage.)
However, if a home was originally built in compliance with an older flood map, a grandfathering provision in the FEMA law allows new owners to retain the older, typically lower-priced policy the old owner held, providing that owner agreed to transfer it. If the previous owner didn’t have flood insurance, you’re in murky waters. (Go to FloodSmart.gov for more information.)
Another surge of expenses
Even subsidized flood insurance is no bargain these days, as you also probably know. Its cost, commensurate with historic floods of recent years, is steadily rising. In April 2015, the Homeowner Flood Insurance Affordability Act took effect, with premium increases between 18 percent and 25 percent, not including surcharges. That’s because the program is $24 billion in the hole, due mostly to enormous losses sustained from Superstorm Sandy and Hurricane Katrina, not even factoring in massive flooding this year in Massachusetts, Texas and elsewhere. You might have to pay $4,000 or more a year now for a policy, depending on your property’s flood “rating,” or risk.
But elevating a home out of a flood plain isn’t legally required by the federal government, so the old owner is off the hook.
Water you gonna do?
Now, you’ll have to weigh the value of the discounted insurance premium you’d get after raising the house versus what you’re paying now for unsubsidized insurance, then factor in your home’s future marketability or lack thereof, the number of years you plan to live there, the home’s flooding history, if any, and of course your own safety and peace of mind, before deciding whether raising the place is really worth it.
Here’s wishing you a dry future. Good luck!
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