In the United States, no federal law requires home sellers to disclose information about previous flood damage or the likelihood their property will flood again. As a result, each state has its own flood disclosure laws, which vary greatly.
While 29 states require some degree of flood disclosure, the rest do not. Fortunately, Oklahoma’s flood disclosure laws are among the most stringent in the country, keeping homebuyers informed of flood risks. According to state law, a mandatory residential property condition disclosure statement must provide the following information:
- Any prior flood damage the seller is aware of
- Any flood insurance requirements the seller is aware of
- Whether the seller currently has flood insurance on the property
- The flood zone and floodway status of the house
In addition to trusting the seller’s information on the disclosure statement, buyers can also ask specific questions. Home sellers are legally bound to tell the truth about their property, so you should be able to uncover more information this way. You can also schedule a home inspection to uncover lingering damage from recent floods. This is a must, whether the seller discloses water damage or not.
So what if you learn that the home you want to buy has suffered water damage or is at risk of flooding? Should you proceed with the sale or walk away? Consider the risks of buying a flood-damaged home to help you make a wise decision.
The House Could Have Lingering Damage
It’s certainly possible to restore a home to its pre-flood condition, even if several feet of water flowed through the building. However, time is of the essence. If the flood-damaged structure wasn’t properly dried within 24 to 48 hours, it could have long-lasting problems, such as hidden mold growth, foundation issues, and other structural damage. Even if they don’t pose an immediate threat, you’ll have to contend with these problems sooner or later.
The House Could Flood Again
If the home is in a flood zone and a weather event caused the water damage, it’s not a question of if the property will flood again; it’s when. A flood zone is a designation set by the Federal Emergency Management Agency (FEMA). Different levels of flood risk exist in different areas, resulting in the labels “minimal risk,” “moderate risk,” and “high risk.”
High-risk zones are also called Special Flood Hazard Areas (SFHAs), meaning homes here have at least a 1 percent chance of flooding each year. While the probability seems pretty low, it translates to a slightly higher than one in four chance of experiencing flooding sometime during a 30-year mortgage. Plus, highly destructive “100-year floods” are starting to occur more than once per century due to climate change, increasing the risk for homes in SFHAs even more.
Extreme flooding can be emotionally and financially devastating. The disaster may require you to evacuate, secure temporary accommodations while your home is repaired, or completely rebuild or relocate. Even small floods can create huge headaches and costs. After all, repairing flood-damaged building materials, replacing personal belongings, and sanitizing your property are no small expenses.
Flood Insurance Could be Costly
Water is the most common and destructive element a home can encounter. Often, water intrudes from outside, whether from rising groundwater, flash flooding, melting snow, coastal storm surges, or rivers bursting their banks. A single inch of water can cause up to $25,000 in damage.
Homeowner’s insurance rarely covers flooding from external sources, meaning you must obtain separate flood insurance. If you buy a house in an SFHA, mortgage lenders may require this coverage before extending a loan.
Single-family homeowners can get coverage of up to $250,000 in structural damage and $100,000 in content damage. Whether the house has existing flood damage or is simply built in a flood zone, you may have difficulty affording flood insurance. According to FEMA, the average federal flood insurance policy costs about $700 per year, but your premiums could be much higher if your home has a high flood risk or has flooded before.
You May Need to Invest in Flood Mitigation
Ask the home seller if they have done anything to mitigate the flooding risk. This may include improving drainage on the property, installing a sump pump, and waterproofing the basement. If the seller hasn’t taken these precautions, you’ll likely need to foot the bill yourself. You can also look into any steps the local government has taken to improve floodplain management for the entire community’s benefit.
The Home May be an As-Is, Cash-Only Sale
Severely flood-damaged homes are often sold “as-is” and for “cash-only.” These listings differ from regular properties because a mortgage lender is unlikely to approve financing. Therefore, buyers are required to purchase the house in full and shouldn’t expect any help paying to repair the damage.
Buying a cash-only home could be a great investment, allowing you to secure a property at a highly discounted price, fix it up, and flip it for a profit. Of course, this is only possible if you have a large sum of money to fund the purchase. Even then, future buyers could be reluctant when they learn about the home’s flood history. And if the damage ends up being more extensive than originally anticipated, repair costs could diminish any upfront savings or profits you garner from a future sale.
Get Pre-Approved for a Mortgage
Choosing whether to buy a house that has flooded before is a highly personal decision only you can make. No matter what you decide, Financial Concepts Mortgage can help make your purchase possible. We are Oklahoma’s premier private mortgage lender, with more than 20 years of experience financing home loans. Our team would be happy to discuss the competitive rates available on the various home loans we offer. To get started, please fill out your application online or call us at (405) 722-5626 to apply over the phone.