Flood Zone Mapping Impacts Real Estate Transactions More Than ...

We have all seen it: homes devastated by floods, filled with mud and debris ? or worse yet, homes floating down a swollen river. Have you sometimes wondered why anyone would want to live in an area that is always prone to flooding? Ironically, the answer to that question remains an unsolved mystery. Equally mysterious is the fact that you could reside in a flood plain and not even know it, if not for flood zone certification, a process that is overseen by the federal government through the National Flood Insurance Program (NFIP). Part of the oversight provided by the NFIP is the creation of flood maps based on flood zones (low, medium and high-risk flood areas) determined by FEMA.

Perhaps the most frustrating aspect of flood zone mapping from our perspective is the occasional ? and yet predictable ? delays in funding reauthorization from the federal government for its own program. Many of us are not routinely aware of what occurs in Washington, D.C. and how it affects us. You may not consider a simple or minor action (or inaction) on Capitol Hill as one having an immediate major impact on real estate or any other industry, but it happens frequently. This is what?s known as the butterfly effect: a seemingly insignificant or small occurrence that transforms into greater consequences for different purposes or outcomes.

If you don?t think this mapping process impacts you or your neighbor across the street, think again. If the flood zone map shows that you are living in a 100-year flood plain, you will be required to purchase flood insurance in order to purchase or refinance a home, and flood insurance is very expensive. However hard it may be to believe, the maintenance of a national registry of flood zone maps can directly or indirectly impact your ability to refinance or purchase property.

Maintaining updated flood zone mapping is crucial. A number of years ago, NFIP?s funding for this process was not renewed. The butterfly effect of this inaction was an expensive flood insurance liability for an older industrial area near downtown Columbus, Ohio. Without funding, the flood zone maps were not updated, which meant that no property development could be insured. Substantial economic activity in that area was shut down for four years. And because the maps had not been maintained, once the flood wall was finally constructed, the insurance companies? hands were tied. They had to require flood insurance, an expensive overhead cost that could have been initially avoided but for congressional failure to act.

In Closing ?

This butterfly effect was recently averted, albeit very close to a May 31 deadline, when the U.S. House of Representatives approved a bill, H.R. 5740, extending NFIP provisions for 60 days. Had the interim extension not occurred, funding for flood zone mapping would have halted, and an estimated 12,000 real estate transactions per day across America would have been put on hold, pending the program?s renewal by Congress. But 60 days is going to come and go very quickly, and we?ll be right back in the same boat.

Scott Stevenson

Source: http://inclosing.net/2012/flood-zone-mapping/245/

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