A nationally distributed resource for those interested in flood zone issues, land surveying, real estate, history, and educational opportunities. If you no longer wish to receive this newsletter, simply click the unsubscribe link in the footer of this message.

Message from Jim

The National Flood Insurance Program (NFIP) faces the well-known issue of trying to recover debt from the payout of claims exceeding income generated from premiums, due in large part to subsidized rates and more frequent flooding events. Faced with severe budget constraints, the difficulty of delineating and mapping flood zones that are constantly changing, and then assigning a level of perceived risk, is very understated. To accept the belief that the program can place perceived risk in the same location as actual risk is an impractical expectation, as this would require the many qualified engineers to accurately predict Mother Nature’s behavior now and for decades into the future. This is not a practical expectation even with an endless budget.

Real estate disclosure creates an important opportunity for homeowners, insurance agents, and real estate and mortgage professionals to gather important information on both perceived and actual flood risk, with intention to better protect our natural resources, lives, and property. In preparation of my presentation on the impact of the flood zone on real estate values at the Association of State Floodplain Managers National Conference in Atlanta last month, we researched real estate disclosures in other states and found many differences. For example, California real estate disclosures actually state, “the maps on which these disclosures are based estimate where natural hazards exist. They are not definitive indicators of whether or not a property will be affected by a natural disaster.” Education can be a slow process, but this is a very pertinent statement in disclosure. Similar to California, Florida also has an entire section dedicated to natural hazards and flood.

In Maine, as with many other states, in-depth flood hazard disclosure does not exist. Simply asking if a flood insurance policy exists is inadequate. A seller may be without a mortgage, an incorrect determination may have occurred, or map error may exist. In each of these situations, a seller could answer "no". This question also does not even separate perceived and actual risk. This is a real concern when trying to place appropriate value on real estate. A flood map is only the method in which the flood program attempts to determine the perceived risk of loan collateral when a federally backed loan is created in excess of $5,000 is created. Of added importance, the program does not evaluate perceived flood risk for cash purchases.

With a higher level of flood disclosure, values will be more appropriately set, client representation will be improved, and real estate licensee liability will be reduced. One could argue that no one element of real value impacts a home more than flood damage, as it occurs over 500% more often than fire damage. In my opinion, it should be given higher priority than the age and condition of a heating system, roof shingles, water supply, or waste water disposal. If these items exist for the protection of life safety, value, and investment return, flood hazard is very deserving of full disclosure. Change which removes us from our comfort zone is often the best decision we can make for growth and development.

Q: Does this structure meet the definition of a building? A: Not quite. While it does have at least 2 rigid exterior walls and appears to be well affixed to the ground, it does not yet have a fully secured roof.

Flood Fact: Buildings Under Construction Can Be Covered by Flood Insurance

We tend to only think of flood insurance when it comes to existing structures. But what about those that are still being built?

To be eligible for coverage, the structure under construction must meet the NFIP's criteria for a "building":

A structure with two or more outside rigid walls and a fully secured roof, that is affixed to a permanent site

If the structure is not yet walled or roofed as described in the definition for a building, then coverage applies:
(1) Only while such work is in progress; or
(2) If such work is halted, only for a period of up to 90 continuous days thereafter.

However, coverage does not apply until the building is walled and roofed if the lowest floor, including the basement floor, of a non-elevated building or the lowest elevated floor of an elevated building is below the Base Flood Elevation in Zones A or V.

The NFIP insures against direct physical loss by or from a flood to materials and supplies to be used for construction, alteration, or repair of the dwelling, while they are stored in a fully enclosed building at the site or on an adjacent property.

~ NFIP Flood Insurance Manual, Policy Section, 2015

The Elevation Certificate is an administrative tool of the NFIP which is to be used to provide elevation information necessary to ensure compliance with community floodplain management ordinances, to determine the proper insurance premium rate, or support a request for a Letter of Map Amendment (LOMA).

Resources

FEMA's Elevation Certificate form is set to expire July 31, 2015, and revisions are being considered

Pending approval by the Office of Management and Budget, two revisions to the current EC have been proposed: 1) addition of a new building diagram that will show a true basement with access to the outside via a subgrade door and steps up to the ground level, and 2) a box to indicate if a property is in a LiMWA area (Limit of Moderate Wave Action.) New DHS standards may also impact the look of the form.

There is typically a 12-month "phase in" period during which both the old and new forms can be used. Elevations certified after the last day of the transition period must use the new form. The dates have not been announced yet but we will keep you informed. You can also check FEMA's website for updates.

In the News

"How federally subsidized flood insurance can artificially increase the value of risky homes"

By Beth Daley, The New England Center for Investigative Reporting, June 14, 2015
The topic of perceived vs. actual flood risk and its impact on real estate value is something we talk about often. We were pleased to recently find an article that supports these concepts through a Q&A session with Chad McGuire, a professor from the University of Massachusetts Dartmouth.

"Insurance premiums signal risk to the insured. If we engage in risky behaviors, like smoking or getting into car accidents, then our medical and auto insurance premiums are higher. The higher premiums tell us something about the riskiness of our actions. When government subsidizes, or artificially lowers, flood insurance premiums, there is a disconnect between the actual risk and how we perceive that risk. The effect can be people willing to engage in risky behaviors and, in some cases, invest more than they otherwise would in risky areas. ... Coastal communities have become reliant on the subsidies allowing inflated home valuations that lead to investments that might not be supported under normal market conditions. Removing subsidies will provide coastal communities a clearer signal of the actual risks posed, allowing behaviors to realign around those actual risks." ~ Dr. Chad McGuire

Read article here!

What is wrong with this image?

In an op-ed piece published earlier this year titled "Seaward of Common Sense? SC Needs to Put an End to Building on the Beach", author Rob Young points out the obvious failure of trying to save ocean front properties by building walls to stop the water, as the dunes inland from the wall are clearly eroded from water over-topping the wall.

On the bright side, his article is indicative of a shift in perception. He states, "The vast majority of South Carolinians understand the problem. Building too close to the sea is a bad idea, and far too often the taxpayers get stuck paying for it." Young is advocating for HR Bill 3378, which would essentially prohibit seaward movement of the "baseline" which restricts coastal development.

Read more here!

The 2015 Maine Beaches Conference is July 17, 2015 - Register Now!

Southern Maine Community College, South Portland
This year's conference will have 2 Plenary and 12 Concurrent sessions, 13 exhibits, 18 posters, and 15 interactives, on a diversity of topics relating to coastal resiliency, floodplain management, environmental monitoring, climate impacts, and more!
Click here to learn more and to register!

Happy Independence Day!

The Washington Monument is a spectacular site on the Fourth of July, and apparently, it may now be the largest geodetic control mark in the world! During a repair effort in 2013-2014, the peak of the monument was surveyed with greater accuracy than ever before.
Read more!

July Flood Funny

Photo by Paul Thomas, from "The Express", UK, 2014

Do you have a question about land surveying, flood zone issues, or real estate?

Frequently Asked Questions
Email: info@nadeaulandsurveys.com or call (207) 878-7870

Have you missed any issues of our newsletter?

Make sure you add info@nadeaulandsurveys.com to your Contact List.

Visit our Newsletter Archive

Need more information?

Useful Links

Looking for Beyond the Boundary, the Educational Component of Nadeau Land Surveys?

Visit Beyond the Boundary's Webpage

Nadeau Land Surveys provides information in this newsletter and during learning events for general guidance purposes only, and does not constitute the provision of legal advice or professional consulting services. The information provided should not be used as a substitute for the engagement of professional services with the appropriate professional consultant(s) and/or any required municipal, state, or federal approvals. The intention of our educational delivery is to provide useful content and general guidance but is provided "as is" with no guarantee of completeness or accuracy, and is without warranty of any kind, expressed or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.