Appraising flood plains or FEMA designated flood areas can be a bit challenging. In the wake of the many storms that produced “rising water” of various types, consumers have come to realize the significant damage that a storm can cause. Tropical storms and hurricanes can cause water to rise in the form of tidal surges, rainfall, waterways and other tributaries that are overcome with a surplus of water. These situations can lead to significant damage and associated costs to restore property to it’s desired condition. The risk of these circumstances is particularly of concern in certain flood zones and therefore there is likely an effect on value. Not to mention the increased cost of insurance in these areas which is also likely to effect value.
Establish the Flood Zone
One part of the lending procedure is to establish the flood zone of the property. Many times the elevation is also necessary in order to adjust and in some cases reduce the cost of flood insurance. The reduction in the cost of flood insurance often occurs when a structure is located in a flood hazard area but is elevated thereby reducing or eliminating the need for flood insurance. The flood zone is provided in the appraisal and additional flood documents are ordered through the lender. In certain conditions a survey may be necessary. The governmental organization FEMA is responsible for issuing and maintaining flood maps. These maps are available through the FEMA website.
The appraiser is responsible for reporting the flood zone of the subject property and analyzing what impact the flood zone may have on value. In some situations consumers will not want incur the additional costs associated with properties located in a flood zone. This is particularly true when the property isn’t located on the waterfront but is subject to the necessity of a flood insurance policy based solely on the close proximity of the water the subject in fact enjoys no access to. In this scenario it is possible that the consumer can purchase and alternative property that is outside of the flood zone or elevated thereby reducing the flood insurance premiums to a preferred rate that is not required by the lender. Some consumers will pay more for a property outside of a flood hazard zone due to the reduced cost of insuring the property.
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Appraising in Flood Plains