2 Sure Ways of Selling a House in a Flood Zone
Even though the information on this web page is provided by a qualified industry expert, it should not be considered as legal, tax, financial or investment advice. Since every individual’s situation is unique, a qualified professional should be consulted before making financial decisions.
This article will describe the process of selling a house in a floodplain and explain your options so that you can do it confidently.
Having been through this process as a real estate investor, I know that you can successfully sell your house in a flood zone and I will tell you how exactly. There is an easy way and a hard way, each with its pros and cons. We will discuss both.
Let’s get started.
How Hard Is It to Sell a House in a Flood Zone?
2 Solutions for Selling a House in a Flood Zone
There are two ways of selling a house in a floodplain:
- Selling your house as-is without making property changes to address flood risk or damage
- Making any needed improvements yourself and then selling the house to the general public
We’ll look at both options in detail so that you’ll know the best way to sell your home.
Issues Associated with Selling a Home in a Flood Zone
A floodplain is an area that the Federal Emergency Management Agency (FEMA) has designated to be a Special Flood Hazard Area. It’s also called a 100-year floodplain. This is a high risk flood zone.
FEMA estimates that over 13 million homeowners live in a floodplain.
Selling a home in a floodplain will be impacted by several factors:
- Is there a history of flooding on your property?
- Has actual flood damage occurred to your home?
- Have you filed any claims on your flood insurance coverage?
To sell your home, you’ll need to work with people who understand the issue. Your broker or your buyer should be experienced in dealing with flood hazards.
If you decide to market your home for sale to the general public, you will have to address the matter of flood insurance. This will be an additional expense for the buyer over the years.
If your home is located within a high risk flood zone, federal law mandates that the owner has to have flood hazard insurance.
FEMA estimates that properties in these zones have a 25% chance of flooding during a 30 year period. Thirty years is the typical mortgage loan term. For this reason, mortgage lenders will look carefully before approving a loan on a home in a floodplain area.
What if your home has flood damage that needs to be repaired? A lender will want all repairs to be done before closing on the sale. The same is true for making improvements that will mitigate the risk of flood damage.
Some areas have a history of weather that increases flooding incidents, such as heavy seasonal rains or hurricanes. Lenders may be hesitant to lend in these areas without the collateral property being modified to prevent potential damage.
Since the majority of homebuyers need to borrow a significant portion of the purchase, the mortgage lender will have an impact on your options.
Does Having Flood Insurance Increase Your Chances of Selling?
Anything that you can do to assure the homebuying market that your property is safe will help you sell your home.
You need to point out your ability to get flood insurance on your property in your marketing materials.
You have the right to a copy of the Comprehensive Loss Underwriting Exchange (CLUE) report that will show whether you have made any claims on the policy. If you haven’t made any claims, potential buyers should be made aware of that as well.
The cost of flood insurance can be different across the country. If your area has experienced significant flooding, your premiums may be higher as a result.
Pricing will depend on the age and location of the house, the amount of coverage, the home’s elevation, its proximity to water, and the amount of your deductible.
The national average has been calculated to be about $700. On a state-by-state basis, the lowest average annual premium is $572. The highest average annual premium is $1,395.
Actual premiums for homes in high risk areas with recent flooding activity can be several thousand dollars.
It may help if you offer to assist your buyer with the cost of the first year’s flood insurance premium. This can be done in cash at closing, or you can give a credit for that amount on the price of the home.
Do You Need to Disclose Your Home’s Flooding History?
Currently, there is no federal requirement to disclose prior flood damage, or flood zone certification when selling your home. 29 states have taken up the issue and do require some level of flood disclosure.
Most states have a catch-all provision that the seller must disclose anything that is material to the sale of the property. Flood damage or certification would certainly fall into this category.
The buyer will find out about the property’s flood certification status prior to closing from the appraiser, the surveyor, and the title insurance company. If water is visible nearby, or the area has a history of flooding, even an average agent will know to ask about the flood zone.
If you neglected to disclose the issue, you will lose credibility with the buyer and possibly lose the sale. In some cases, you may incur legal liability as well.
Solution 1: Find a Buyer Who Will Purchase Your Home As Is
The first option that we mentioned was selling your house as-is without making property changes to address flood risk or damage.
This is the easiest way to sell your house. Let’s look at how to sell your house as-is, and who your potential buyers are.
Who Purchases Houses in Flood-Prone Areas?
Based on our discussion so far, an “as-is buyer” would need to be:
- someone who understands the issues related to properties that are located in floodplain areas.
- someone who can avoid the demands of a mortgage lender by paying cash for the property.
This eliminates most typical homebuyers. They are looking for a move-in ready home that they can easily finance with a mortgage loan.
Real estate investors are different. They buy residential properties on a regular basis. This gives them a wide range of experience with atypical properties such as those located in floodplain areas.
Investors pay all cash for their purchases. They aren’t bound by a lender’s opinion or the need to use appraisers or inspectors.
With their experience, they can make their own decisions about the properties that they purchase. They know market values and can calculate the value of your property without an appraisal.
They can perform their own inspections to determine if work is needed on the property and what it will cost.
Not only are real estate investors not turned off by floodplain properties, but they are also looking for properties like yours. Investors have the ability to do a lot of the work needed on the properties that they buy. They can fix a lot of flood damage for themselves.
Work that requires a licensed tradesman is done by subcontractors that they use on a regular basis. Since they are a regular source of business for these contractors, investors are often charged less than the general public.
Using their own money and reducing their costs allows them to buy less desirable properties and make a profit. They need properties like yours.
We’ve described all you need to know about selling your house to a real estate investor in a separate article. But let’s go over the basics in the next section.
What Benefits Do I Get when I Sell My Home As Is to an Investor?
There are benefits to selling your home as-is to an investor that may make this a good option for you:
- You won’t have to spend your money to fix any damages or to flood-proof the property. When choosing to work with an investor, you can still sell your house even if it’s condemned.
- When you sell to a cash buyer, you don’t have to worry about whether or not someone’s lender will approve the location and condition of your house.
- Selling your house fast for cash and as is greatly streamlines the entire process. Many times you can close on the sale in a few weeks.
- The cost to you of selling your house will be reduced by selling to an investor. They don’t use realtors or other third party providers who charge fees and commissions. If you want, they can probably include your costs into the price. You may go to closing without needing any cash of your own.
- It’s easy. No marketing, no broker interviews, no open houses, and no showings. You deal directly with the buyer.
You need to know that selling your house as-is won’t get you top dollar for your home. The investor has to consider the cost of any work to be done and the profit margin that they need to make.
But when you consider the convenience, and calculate the reduced closing costs, you may find that selling to a real estate investor is a good option for you.
To give you an idea about the closing costs in different scenarios, we’ve put together three extensive guides:
- Cost of Selling a Home with a Realtor
- FSBO Closing Costs and Fees When Selling a Home by Owner
- Closing Costs for Home Sellers (3 Options Compared)
How to Get the Best Price when Selling for Cash As Is
To sell your house as-is for the best price, you need to do the following things:
- Find multiple investors who are looking for properties in your area.
- Research their experience and reliability.
- Approach them for offers that you can compare.
Or, you can use our platform — HouseCashin. HouseCashin is the national authority on selling your home to a professional investor. We will connect you with reputable cash buyers that we have carefully researched in your area.
Our simple Request Cash Offer online form will put your property in front of the buyers that you’re looking for.
Using HouseCashin allows you to get up to five offers on your house to compare. And, you’re under no obligation to take any offer.
HouseCashin is the safe, effective, and easy way to sell your home fast, for cash and as-is.
Solution 2: Sell It Traditionally
Before starting to look in real estate investors near you, you may also want to consider the second option — selling your property the traditional way. This will take time and money, but you might be able to get a higher price for your home that way.
To sell a home that is situated within a floodplain zone the usual way, you’ll have to remove any negative perceptions about the property.
You’ll need to fix any damage caused by previous flooding. You’ll also have to reassure the buying public that future flooding will not be a problem.
This may mean taking steps to flood proof the house such as elevating it above flood levels.
Once all work is done to the house, it can be marketed to the homebuying public. You can either do this yourself as a For Sale By Owner (FSBO) sale, or engage one of the real estate agents in your area to list and market the property.
Using an agent (also called broker) will cost you more in commissions, but you will access the region’s multiple listing service (MLS). This puts your property in front of thousands of brokers.
The broker will also handle the growing number of documents and disclosures that are needed for a public real estate transaction today.
If you sell your home for yourself, you still need to be prepared to pay commissions to a buyer’s agent.
Here are the steps that you may need to take to sell your home.
Elevate the Home
Elevating your home places the living area above the base flood elevation (BFE). Raising a house above flood level can decrease flood insurance premiums by 30% and make your home more marketable.
This involves lifting the house off its existing foundation and building new support under it. Although the process is easier with basement or open foundation (crawlspace) homes, it can also be done with homes built on a slab.
You will need to make sure that the first floor living space is above the BFE. You can extend the height well above that height if you wish.
If your home is damaged by flooding or being renovated, your local community floodplain management regulations may require that you elevate your house.
To ensure that your house is at the minimum level above the BFE you’ll need to get an elevation certificate. Before the work is done, you should have a surveyor or engineer determine the height necessary to raise the structure.
Once the work is finished, the final height can be determined and the certificate issued.
Repair Structural Damage
If your house has been flooded before, it probably has many types of damage that we described in our guide Selling a House in Bad Condition if It’s Old or Damaged and Needs Major Repairs.
Your property should be inspected for structural damage. Flooding can wash away dirt from around piers and cause settling.
Moisture from flooding can cause wood rot in floor joists and support beams. This would need to be either cut out and reinforced, or replaced altogether.
Over time, moisture can cause mold. This will require cleaning or possibly removal of the contaminated wood. Read our guide on selling a house with mold problems to learn more about this issue.
Utilities may need to be relocated. You might need to place your heat pump in your attic or on a platform above the BFE.
Strengthen the Foundation
If your foundation has been weakened by flooding, you may have to strengthen it to make your home safe and prevent further deterioration.
This may involve underpinning the existing foundation or piers, or jacketing the foundation. Jacketing involves adding additional support around the foundation or structural columns.
You may need to install flood vents in the crawl space. These are openings that allow flood water to go in and out of the space underneath your home. This can ease the pressure put on your foundation by flooding water and reduce structural damage.
How Much to Spend when Making Improvements on a House in a Flood Zone?
The cost of improving a house in a flood zone will be impacted by a lot of things.
The age and condition of the home could require upgrades beyond minimal repairs. If repairs are extensive, you may have to bring the entire house up to current building codes. Labor costs can also vary greatly in different parts of the country.
A structural report should be prepared first to make sure that all necessary work is done. This will cost between $200 and $1,000.
According to consumer websites, the average foundation repair costs in the US are about $4,500. The high end can be from $7,000 to $10,000.
If underpinning is needed, the cost will be from $1,000 to $3,000 per pier. Stabilizing existing foundation walls can cost anywhere from several thousand to over ten thousand dollars.
If the building needs to be elevated above the BFE, raising the structure alone will cost an average of $6,000 and could be as much as $14,000.
Repairing structural damages and elevating a house often mean replacing or moving mechanical systems like electrical and plumbing. Labor costs for these tradespeople can vary from $50 to $150 an hour.
If the work is extensive, a permit can cost more than a normal building permit. Permit costs from around the country are reportedly $2,000 to $5,000.
Depending on the amount of structural and cosmetic repairs to be made, mechanical systems to be moved, and labor and permitting costs, the cost of elevating and repairing a house can be from $25,000 to $100,000.
Repairing a foundation can take as little as 1 to 3 days. If you’re elevating your home and rebuilding the foundation, you should expect 3 to 4 weeks.
When you’re calculating the amount of time needed to have this done, always include time to get on everyone’s schedule:
- Hiring an engineer to prepare a structural inspection.
- The time it takes for permitting.
- Interviewing and selecting contractors.
- How long before the contractor can mobilize onsite.
Lining up contractors and getting approvals can add several months to the process.
Once the work has been done and the property cleaned up and landscaped, you’ll start marketing your house. Depending on your market and the time of year, it may take a few days or a few weeks to sell a desirable house.
Selling a house in a floodplain will probably take longer. Count on a month. From that point it will take from 4 to 6 weeks to close on a traditional property sale to a homeowner.
Start to finish, you’re looking at from 4 to 6 months to fix up and sell a house that’s located in a floodplain.
Which Solution to Go For?
When selling your house that’s in a floodplain, the right solution for you depends on your individual situation.
If your house is barely in the floodplain zone, and there has been no flooding in the time you’ve owned the property, the costs to prepare your home for sale may not be very high.
Because of public perceptions and the statistical possibility of future flooding, selling your house will take more time than a normal sale. You may have to be patient and wait for the right buyer.
Bear in mind, the longer it takes to sell a home the less likely you are to get an offer that is close to your asking price. Also, during the time it sits on the market you will have to continue paying utility bills and mortgage (if you have one).
If you have the time and the funds to prepare your home for sale, you should consider selling the traditional way.
However, if your home needs more extensive repairs, it may cost too much money out of pocket for you to handle. Your personal situation may not give you enough time to sell your house this way.
If you don’t have the cash and the time you need to sell your house the traditional way, a real estate investor may be the solution you’re looking for.
To maximize the value you get from the sale of your property to an investor, consider requesting a cash offer from HouseCashin. We are a national platform connecting homeowners looking to sell their house fast and for cash with real estate investors willing to help them.
Fill out our Request a Cash Offer online form to get a few offers from competing real estate investors working in your area and vetted by our reputation standards.
Then choose the best offer and quickly close on your home within a couple of weeks, skipping the inconveniences and upfront expenses of a traditional real estate sale.