All Forum Posts by: Ben Stout

Hey everybody, 

Well, this morning was the big meeting with the development office. The lady was by far the  nicest public servant I've ever dealt with and she said look at this map. The purple stars are the homes who have protested around you and gotten the A zone designation dropped. There were 18 of them. They were all around the proposed property. She said no one has been turned down and she simply knows the FIRM is wrong. She said as soon as I close she'll help me get it taken out. As one poster put it, I believe this property was actually a diamond in the rough. Once the flood insurance is dropped, it will have about $20k built in equity and it would actually make a great flip. I decided to go ahead and purchase it ... but with cash--just in case. 

Thanks to all for your comments and help. I love this community. 

@Justin S. 

 You make great points. My real hang-up here is the resale value. I don't like buying on something I know has limited appreciation due to potential constraints by the government. If the average person is looking to buy a home and finds that the cute-little-ranch has a $150/month flood policy attached to it, I think they'll look elsewhere unless I am asking a very low price that makes it affordable. They'll probably think the same as I do about their resale price later down the road. 

Good call, @Jonathan Twombly. I will never make this mistake again. My due diligence was completely sloppy and I was overconfident. It is a HUD home and was definitely not disclosed. I don't think HUD had any idea and there was never an elevation cert done on it because it was never in the flood zone before. 

Hey Sean, 

The big problem was I didn't even realize it was in a flood zone (had no idea and the area has never flooded.) This was only found after I realized the new FIRM slightly spills over into 1/8 of the lot. 

All, 

I'm curious as to if you would blame your realtor at all on this one? I am trying to take responsibility and ownership for this mistake as I didn't realize it was in a flood zone. My excuse is that I have been very busy lately (working overseas) and I did not perform my due diligence (FEMA site) like I should have. That said, do you expect your buyer's agent to keep you privy to and be on the lookout for such things? Seems like quite an oversight.

@Colleen F. 

I will let you know. This has taken a while so I'm now into the end of my contract with HUD. I have to apply for an extension which seems to be $25/day until I close. My other option is to pay cash for this house. It's never flooded before even having been around through Hurricane Ivan, our recent storm in April which was crazy, and other hurricanes. If I choose to buy and hold, it might be an OK option and I wouldn't have to carry the flood policy. If I do finance, I could either be fine once it's moved to X zone, or I'm married to the $1800/month policy until the end of the mortgage. I could pay it off early, but that kind of defeats the purpose of paying all the costs associated with financing. If I sell later on and it's in the A zone, I don't think it would be easy to move.

I'm curious as to what the lady is going to say tomorrow. 18 homes have already been taken out of the A zone in that community, so it seems like a fairly safe bet, but assumption is the mother of all.... 

Thank you all for taking the time to respond. I have the elevation certificate and survey now. It is above the BFE, but I'm not sure of the implications. I'm going to take it to the county office in the morning. If they tell me that, given the data on the certificate, it's a done deal as far as having it put in the X zone, I'll close on it. If they give me a shaky answer, I'm just going to exit the deal, curse a bit, then have a good cry at the nail salon. 

PITI + management would leave me with roughly $300 a month. This of course does not account for vacancies, advertising, and all of the other stuff we run into. I too am looking at this in a worst case scenario and have a very hard time putting faith in the idea that it's "almost sure to be approved for X zone status."

I do absolutely think that a flood zone determination (if it stands) would turn most would-be homeowners away. 

The issue I ran into was that this is a HUD home. They gave 5 days for DD and I thought I was clear due to using a site that had it listed as X zone (recent change to A.) The listing agent has stated they "may refund my money," but as I'm an investor they are not required.

Thanks for your input. 

Hey everybody, 

I've gotten myself into a heck of a pickle and I'd like to share this (hopefully brief) account to solicit advice and warn others of potential flood zone pitfalls. 

I bought my first rental 10 years ago and have about 15 right now. My agent is a 30 year veteran of the area and owns the largest property management company in the area and invests in many SFH as well. She recently brought a great deal to my attention and so I began my due diligence. My first fatal mistake was that I used freeflood.com. If you use this, stop. The maps are out of date and you should always use the FEMA site and that site only. Many others are not changed when FEMA decides to redo everything.

So after my EMD is accepted everything is looking good and then I'm told I need flood insurance because the maps just changed. The lady in the county government told me that 18 homes in that division have already been changed from A zone to X zone (insurance not required.) I would need to submit paperwork to have it corrected which requires 4 to 60 days by FEMA, but I would need a survey and elevation certificate.

My agent assured me that flood insurance would only be about $30 a month even if it couldn't get moved, so I went ahead and shelled out the $700 for these reports. After receiving the reports, my insurance premium was quoted by three agents at $1800 a year. This effectively reduces cash flow by enough that it's not worth my while, unless I can get the flood zone changed. Everyone (the agents and lady they know at the county office) seems to think it will get changed as only 1/8 of the house actually lies in the "flood zone," yet I feel extremely apprehensive. 

My options now are to either close and pray or back out and lose the $2,700 I've put into this deal (appraisal, survey/elevation, termite, EMD, etc.)

What would you do?  

@Paul Jamgotch Thank you for your reply. I'm thinking the same. One thing I realize I've kind of overlooked is the actual amount towards principal I'd be paying off for those years as opposed to starting from scratch on a 30 year.