Flood designation troubles homeowner

By Ilyce Glink and Samuel J. Tamkin

Q: Our son bought a home about 10 years ago in Ohio. He made extensive renovations to the home in 2010. Around that time, he found out from his neighbor that his house is located in a special flood hazard area.

The flood issue is due to a special study done for his town about 30 years ago. The house was in the flood zone when he purchased the house, and now he is being forced by the bank to pay for flood insurance. He is unable to sell the house because it is in the flood zone.

Our attorney says that if we go to trial with this issue, he can get either the difference between the original price and what the price would have been taking the flood zone into consideration, or the cost of the flood insurance for the life of the loan but no other damages. It would cost more than that to follow through with a lawsuit.

Why can't my son get damages, considering that he would never have bought the house if he knew it was in a flood zone? Both the flood certification company and the appraiser neglected to provide accurate information, and both had contracts with the bank issuing the loan. The bank and the certification company have denied responsibility for the error.

A: The one fact we expected to see in your letter, and that you didn't mention, was whether your son has had flooding at the home. Since he made extensive renovations to the home in 2010, we suspect that he has not had flooding problems.

Many homeowners buy homes in flood hazard areas. The question is whether flooding in the area is recurring or infrequent.

Whether your son would have purchased in a flood hazard area or not is hard to gauge 10 years after he purchased the home. You didn't indicate what the yearly cost for flood insurance will be, but lenders routinely require borrowers to buy flood insurance if and when their homes become part of a flood hazard area. Flood maps change, and as they change a home may become part of a hazard area. Lenders have a standard document they require borrowers to sign that requires them to buy flood insurance should their home become part of a flood hazard area.

You can get more information on flood insurance at http://www.FloodSmart.gov. Your son's homeowner's insurance does not cover him for flood damage. Living in a designated flood hazard area allows your son to purchase flood insurance at a low rate. The site indicates that your son can buy $20,000 of flood insurance for about $129 per year.

We don't know how this compares to what your son has been quoted, but this amount does not seem to be a sufficient reason to sue anybody.

As for the appraiser and the flood insurance company that your son's lender hired, those companies were hired and paid for by the lender, not your son. They probably have no liability to you.

It would seem to us that you're better off looking at the big picture and seeing whether the designation has any impact on your son's home. Presumably, other nearby homes are also within the designated area and their owners have had to purchase flood insurance as well. If those homes are comparable in value to your son's, and the homes sell when listed, we don't see how the designation will significantly harm your son's ability to live and enjoy the home -- and to sell it down the line.

You say that he is unable to sell the home. Is that your perception, or has he listed the home and found no buyers will to make offers? There's a big difference.

If he has not listed the home, you could talk to local real estate agents to gauge potential interest. You would also benefit from knowing how many homes are in the flood hazard area.

We understand that changes in the government's flood insurance plan could pose a problem if these changes make it prohibitively expensive to buy flood insurance or if flood insurance is not made available for your son's home. Without this information, we don't really know whether your son would or wouldn't have a problem selling the home down the line.



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