So Your House Is in a Flood Zone—Will Selling it Be a Nightmare?

How hard is it to sell a house in a flood zone? Depending on which type of flood zone you’re in, you may face some challenges ahead to attract the right buyer willing to take on the extra risk and expenses associated with your home’s location. Deep breaths, though.

Think of it like selling a house on the corner of a busy intersection or near a power line—your location in a flood zone is a hurdle, not necessarily a deal breaker from the start. People buy and sell houses with various drawbacks every day. According to FEMA, 13 million homeowners live in the high-risk 100-year flood plain, which means they face a 1% chance of flooding during any given year.

Whether you bought your house when it was already in a flood zone or your house recently got classified as high-risk, find out how to navigate key steps like pricing, disclosures, and conversations about flood insurance. With the right approach, you’ll put yourself in the strongest position to sell despite your location.

Know your situation: Flood zone variances and insurance basics

As a homeowner, you know the ins and outs of your property, including which flood zone you’re in — but here’s a quick refresher on what that means as you go to transfer the home to someone else, according to FEMA (the Federal Emergency Management Agency).

Flood zone tiers

You’re in a high-risk flood zone, or Special Flood Hazard Area (SFHA), if your flood zone on FEMA’s map has a code starting with A or V. (This also is referred to as the “base flood” or “100-year flood.”)
You’re at moderate flood risk (having a 0.2 percent annual chance of flooding) in Zone B or shaded Zone X.
If you live in an area of minimal flooding, you’ll fall in Zone C or unshaded Zone X.

You can look up your flood zone by address via FEMA’s Flood Map Service Center.

The National Flood Insurance Program (NFIP)

If your house is located within a high-risk flood plain, you have more on your mind than water damage whenever severe weather erupts. You’re also likely paying for flood insurance on top of your regular homeowners policy. The vast majority of Americans with flood insurance, or about 5 million policyholders nationwide, get their policy through the publicly subsidized National Flood Insurance Program (NFIP), which FEMA oversees.

The rules around flood zones, insurance, and home financing

Buyers of your home will have many questions about the flood insurance you pay now and what that means for them. Depending on your zone, flood insurance may be a requirement for potential buyers of your property.

Getting a mortgage for a property located in a flood zone

If you live in a high-risk flood zone, you have at least a 1 in 4 chance of flooding during a 30-year mortgage.

Under federal law, people with homes in high-risk areas with mortgages from federally insured or regulated lenders (this includes most nationally known financial institutions) must have flood insurance. However, lenders can, at their discretion, require flood insurance for mortgages on homes located in low- to moderate risk areas as well.

How much does flood insurance cost?

The average homeowners flood insurance premium under the program is approximately $700 a year.

But some residents in areas hit hard by flooding, such as people on Long Island who weathered 2012’s Hurricane Sandy, already have seen their annual premiums jump over the past two decades from $1,200 to $2,500, according to Newsday.

“I have seen premiums that range anywhere from $3,000 to up to $7,000,” depending on the flood zone where your home is located, said Ariel Pena, a top real estate agent in New York City.

The NFIP bases its insurance policies on factors such as a building’s elevation, age, and amount of coverage and deductible. In general, owners of homes closer to water and homes that are more expensive to rebuild can expect higher premiums.

Get the certificate of elevation and do a little legwork

The buyer of your home may need to present their lender and insurance agency with an elevation certificate that basically shows: if a major flood were to occur, would a house theoretically be above the height of the estimated floodwaters, or would it be at risk? Insurance agencies use this document to determine their flood insurance premiums.

One option as a seller could be to go ahead and order an elevation certificate from your local floodplain manager proactively, Pena suggests. You could shop it around to a few different insurance companies to get a few quotes for the new buyers to stay ahead of the game.

Help your new buyers foot the insurance bill

It’s not uncommon for sellers to offer their buyers a one- to two-year home warranty to cover unexpected issues that may arise with the home’s main systems and components during the initial course of ownership. Similarly, a seller could offer to discount the buyer’s flood insurance costs for a year as an incentive to purchase the property, either through an adjustment to the purchase price or credit at closing.

Real estate disclosures and flood zones: Always be transparent

Real estate disclosure laws vary from state to state. Many states have their own specific form that sellers use to disclose any known issues that could impact the safety or value of their property. There’s often a place on the disclosure form to note a home’s past history of flooding or location in a flood zone.

The Illinois disclosure report, for example, lists the following disclosures related to flooding and flood zones:

I am aware of flooding or recurring leakage problems in the crawlspace or basement. (Yes/No/NA)
I am aware that the property is located in a flood plain or that I currently have flood hazard insurance on the property (Yes/No/NA)

You can talk to a top local agent about your own state’s disclosure rules, and HomeLight also has a list of all 50 states’ individual disclosure laws, including their respective reports. However, the general rule is that you should never hide material facts about your house from buyers, regardless of state laws, including its flood zone status or insurance requirements.

“It’s better for everybody just to disclose,” says Pena.