The National Flood Insurance Program (NFIP) underwent some structural changes brought about by the passage of the Biggert Waters Flood Insurance Reform Act of 2012. The intent of this act was to address the issue of insufficient funding of the NFIP resulting from historically subsidized insurance premiums. The greater frequency of claims and the rising cost of these claims have caused FEMA to exhaust the reserve funds necessary to pay claims. Accordingly the Biggert Waters Flood Insurance Reform Act of 2012 was passed which brings about the elimination of subsidized rates for covered properties and seeks to move all policy holders to a market rate based on the actual risks of their property.

With these recent changes there will be some higher flood insurance premiums and the concern becomes whether this will impact home values and anticipated sales prices. Last month I had my first appraisal client request insurable value on a gulf front condominium in Destin. The client was a bank in Alabama. Why the request? Alabama tornadoes. It’s coming folks.

Florida real estate has been hit pretty hard by flood insurance rates in the past 5-7 years. A real mess. I suppose the intent is good but it really hurts real estate.

By example, a few months ago we had a proposed residential property under contract. It was set to close on a Wednesday. Tuesday we were informed by the lender that the back corner of the house was in a flood zone. As a result, the entire property had to have flood insurance. How much? Over $5,000 per year! Now the issue here was confusion. City versus developer versus incorrect FEMA flood maps. It was a mess and a “he said she said” scenario. With the proverbial promise that “it would be worked out and not in a flood zone.” Uh huh, right.

We met with the homeowner that evening. He point blank asked us what he should do. Naturally, we immediately said do not close. Too much risk. Think about it: 30 years x $5,000 = $150,000. No way. We got the buyer into a more beautiful custom home not in a flood zone in the same subdivision and they are very happy.

Be careful when buying real estate. Check and confirm the flood zone status 10 times. Build above the elevation benchmark. By the way, the agent’s commission was $10,000.  How many agents would sacrifice their big commission to give principled advice? Not many. But with Mims, you can be assured we have Your best interests in our minds.

BBQ: “It is a comfortable feeling to know that you stand on your own ground. Land is about the only thing that can’t fly away.” ~Anthony Trollope

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