Should I buy this house, or not?
October 8, 2013 6:14 AM   Subscribe

I'm looking at buying a house on the bayou, but am unsure whether the flood and flood insurance issues mean I should offer less, or just run.

I live in Lafayette, LA. Found a nice house on the bayou, which I've been looking for. Built in 1968, one owner, in immaculate shape, right size. Asking price is 159K, got them down to 145 without too much trouble.

The problem: It's two feet below the flood line. I can continue the guy's flood policy, which is about 1.5K a year.

However, the premiums could go up. I don't know if when I go to sell it (no plans to) I could transfer the policy again.

It's on a slab, and there is zip I could do to mitigate.

Do I make another offer for less with this in mind, or should I just run screaming?
posted by atchafalaya to Home & Garden (12 answers total)
atchafalaya: "Do I make another offer for less with this in mind, or should I just run screaming?"

Are you working through a realtor to make the offers and so on? He or she should be able to pull a report of comparable properties, specifically what's sold or gone to escrow (not what's listed) in the last 30 days or so. This would let you know if the place is reasonably priced.

Transferability of the flood policy is moot if you have no plans to sell, but a call to the insurance company (or an independent insurance agent) could probably clear that up pretty quick.

This site by the National Flood Insurance Program has more information on rates, zone classifications, etc.
posted by jquinby at 6:23 AM on October 8, 2013 [2 favorites]

Best answer: I looked at this GIS map and it seems to me (unless I'm looking at it wrong) that the house is in flood zone "A". When I then reference this explanation page, it defines flood zone A as, "Areas with a 1% annual chance of flooding and a 26% chance of flooding over the life of a 30-year mortgage. Because detailed analyses are not performed for such areas; no depths or base flood elevations are shown within these zones."

A one-in-four chance is pretty high.

I think when my annual flood policy comes in, it includes a statement listing any previous flood claims. Has the seller told you whether or not they've had previous floods? If yes, and if you buy it, be sure there isn't hidden damage in the construction.

I would pass on it, but I'm pretty financially conservative. A house is a big expense, and those odds wouldn't sit right with me.
posted by Houstonian at 7:06 AM on October 8, 2013 [1 favorite]

Best answer: I live near New Orleans in a house in a Zone X and I am still paranoid about my flood premiums going up. Another issue to consider is whether you can get homeowners (not flood, just homeowners) insurance. We were lucky - our insurance carrier won't write policies on houses within 2 miles of the river or lake and we were out of that zone. Don't even get me started on wind and hail.

If you are a first time homebuyer and haven't ever had homeowners' insurance, I would run, not walk to the nearest exit because you will have a very hard time getting any kind of insurance that will be required by your mortgage provider let alone dealing with flood insurance.
posted by tafetta, darling! at 7:12 AM on October 8, 2013

I would talk to a local insurance agent, or more than one, and get their thoughts on premiums and future scenarios. Ideally an agent/broker that has experience with several different insurance companies and can give you a more comprehensive view of the marketplace.
A great home inspector probably has some thoughts on this too.
I don't know if this problem is something you're going to face with all or most properties in the area you're looking to buy, maybe it's just a cost of doing business so to speak. But either way I'd do some insurance research. I'm scared of those premiums skyrocketing one day and then you're stuck.
This Louisiana Floodplain Management Association might be worth a quick call to see if they can point you in a direction?
posted by mrs. taters at 7:28 AM on October 8, 2013

We were in negotiation to buy a house when we found out that it was in a floodplain and would need flood insurance of about $200 per month. The mortgage ends after 30 years; flood insurance is forever. We decided to pass on the house. If we were going to spend an extra $200 per month we might as well buy a more expensive house that wasn't in a floodplain.
posted by rabbitrabbit at 7:41 AM on October 8, 2013

Be sure to read through and fully understand the changes that are taking place with the National Flood Insurance Program, as rates are increasing for a large percentage of policy-holders. More info can be found here and here and an interesting news story here.
posted by jicinabox at 7:49 AM on October 8, 2013 [1 favorite]

Participation in the NFIP is based on an agreement between local communities and the federal government that states that if a community will adopt and enforce a floodplain management ordinance to reduce future flood risks to new construction in Special Flood Hazard Areas (SFHA), the federal government will make flood insurance available within the community as a financial protection against flood losses.

Depending upon when your parish joined the NFIP program, the house may qualify for "grandfathering" into the program. If the parish was participating in the program when your house was built, it would have been built to the correct elevation at that time (1968). The year the home was built usually can be proven by a large increase in the improvement area of the assessment value of the property. If the home was built before the parish joined the program, the house is then rated at the elevation requirement in place at the time the parish joined the NFIP. If the home was built after, it would have been built in compliance of the elevation maps at that time. The home would then qualify as "grandfathered" into the NFIP program. It doesn't matter if after the home was built if the elevation requirement increased, because your home WAS in compliance WHEN it was built.

For example of the above. My home on a bayou was built in 1979. There was no elevation requirement in St Tammany at that time. In 1983 St Tammany adopted the NIFP. The NIFP determined my area to be A-4, meaning homes in that area were required to be built 4 feet above sea level. My home was built at 6 ft above sea level. The house actually qualified for a discount for being 2 feet above the base flood elevation. Fast forward to 2001 when I purchased the home. The flood elevation was now A-12. My flood insurance would have been close to $6,000 a year, based on the fact that it was 6 ft below the current base flood elevation requirement. But, because I was able to prove the house was built in 1979, was in compliance in 1983, it was grandfathered into the NIFP program at the A-4 requirement along with the discount. My flood insurance was reduced to $475 per year.

Also remember that Flood insurance is for the dwelling only, not the land. So have your appraiser break out the value of the house from the property. Only the house can be insured, NIFI will back you up on this as they do not insure land from flooding. The mortgage company will tell you that you must have flood insurance for the entire amount of the loan, that is not true. If the house and land is insured for $200,000 and the house is valued at $100,000 and it floods, the flood insurance will only pay up to $100,000, the value of the home. Also, they will not reimburse you for any "over insured" payments.

Feel free to memail me if your have further questions, I've been through this before.
posted by JujuB at 8:24 AM on October 8, 2013

Best answer: Please ignore my above answer. A newly purchased home will not qualify for grandfathering (subsidies). You can not "assume" his flood insurance at his current rate.

Flood Insurance Reform Act of 2012 Subsidies will no longer be
offered for policies covering newly purchased properties, lapsed policies, or new policies
covering properties for the first time.

It's on a slab, and there is zip I could do to mitigate
Here are some (pdf) ideas for you on meeting the required base flood elevation.

I would get estimates on the cost of these types of mitigation and deduct it from the asking price, otherwise do not consider the purchase of this home. Unfortunately, with the Flood Insurance Reform Act of 2012, your flood insurance will continue to increase.
posted by JujuB at 8:53 AM on October 8, 2013 [2 favorites]

Best answer: The question marks on insurance would have me run away screaming from this.

After Hurricane Andrew in Florida, insurance companies packed up and fled, writing no new policies for homeowners. I had a condo and the insurance on the building had been with Allstate. They left Florida and all of the policy holders high and dry (no pun intended.) We ended up with a new policy for the building, it cost 3 times more than the previous one, and it was with a company I had never heard of.

15 years later, when I bought my house, I got insurance through a company that only recently came back to the market, and only for houses built in 1999 or later, with CBS construction and at least 5 miles inland. Also, you had to work for AT&T. I mean...jeez.

If there's another incident, wind or flooding or whatever, your insurance will go sky high. Also, even if the insurance stuff doesn't scare you off, have a seriously expensive inspection. Moisture detection behind the walls, mold, termites, Chinese Drywall, etc. Have a camera run the length of the plumbing in the house to the street. Sewer pipes cost about $7,000. Ask me how I know.

That humid and that close to water...doesn't sound like a good mix to me.

Good Luck!
posted by Ruthless Bunny at 8:55 AM on October 8, 2013 [1 favorite]

Best answer: I would never buy a house in the 100 year floodplain (1% annual chance of flooding) no matter the insurance situation. Those flood plains are based on historical data and in general you can expect increased flooding moving forward with climate change.

If I bought a house on the water it would be on stilts or piers. That's a very workable solution.
posted by fshgrl at 9:59 AM on October 8, 2013

Best answer: Sample of changes in subsidized premium rates under Biggert-Waters Flood Insurance Reform Act of 2012 Estimated rates based on a policy with a $1,000 deductible and $250,000 building coverage and $100,000 contents coverage cite

Lowest floor of property is 4 feet below base flood elevation:
Subsidized Premium Rates before BW12 - current rate: $3,600
Premium Rates following elimination of subsidies – after October 1, 2013 $10,723

I would think very hard and long before purchasing this house.
posted by JujuB at 10:10 AM on October 8, 2013 [1 favorite]

Response by poster: Everybody, thank you very much. We've decided not to buy the house.

As mentioned above by JujuB, the Biggert-Waters Flood Insurance Reform Act means homes previously grandfathered at lower, federally subsidized flood insurance rates will have their rates rise over a few years to meet actual risk levels.

The final rates haven't come out yet, but as near as can be told, the house I was looking at will go from $1,500 a year for flood insurance (on top of homeowner's insurance) to about $6,000 a year.

Definitely not worth it.

Thank you again, another wonderful example of Metafilter to the rescue!
posted by atchafalaya at 9:31 AM on October 12, 2013

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