Message from Jim
So another month has gone by since the Homeowner Flood Insurance Affordability Act (HFIAA) has passed and many have exhaled acknowledging the need to worry less about flood risk and premiums for a few more years.
The National Association of Realtors has applauded the HFIAA as a responsible and balanced solution to the skyrocketing flood insurance premiums affecting residential and commercial properties that were unintentionally triggered by “Biggert-Waters” (NAR, 2014). In similar flavor, the Maine Association of Realtors shares an article by the Insurance Journal on their website stating the House and Senate have reached a bipartisan deal to delay changes that are raising premiums for many homeowners (MAR, 2013).
Good news, right? Well, not really! Contrary to various reports stating the new legislature, HFIAA is removing or stopping Biggert-Waters (BW12), this is not accurate. It is correct that portions have been repealed or modified, and additions have been made, but it is important for all to understand that the core of Biggert-Waters is still in place, and that HFIAA was not a wholesale repeal of BW12.
The good news pertains to the attention BW12 and HFIAA has generated in the real estate industry. Homeowners and consultants are thinking mitigation, future global concerns, and current and future impacts to real estate values. Concerns of flood insurance premiums are slowly flowing into real estate transactions. In motion are considerations such as explaining flood insurance in Residential Property Transaction Booklets, termination clauses relative to flood, and the mention of flood in the Seller’s Property Disclosure. This level of flood acknowledgement in every real estate transaction nationally will aid the program well.
Remember, a mortgage note in its simplest context is an investment by an individual or entity providing financial backing for a transaction. The interest rate charged creates the investor’s return on investment. In similar angle of a house inspection, mortgage loan inspection, or an appraisal; each provide an evaluation of investment risk since the improvements being purchased are often used as the collateral of the loan if default occurs. Emphasis on well and septic status, age of roof singles, age of furnace, etc. are all important components in evaluating or creating value, but disclosure of flood history should also be evaluated in this process. None of the above noted improvements will impact value of a home more than a flood event. To even have a single statement or question on disclosure is a wonderful start since the word “Flood” becomes mentioned in every real estate transaction.
Personally, I believe that every real estate professional providing service or product to the public must gain a higher level of flood knowledge. Last month, I fielded questions or concerns from seven different professions pertaining to risk, mitigation, and insurance. Reality is setting in that flood risk and insurance are not just flowing through our lives, but are here to stay! Homeowners who address it properly will protect their asset(s), minimize damage, minimize or eliminate insurance premium, and possibly save a life. Opportunities are waiting for the professional consultant desiring to provide superior flood guidance to the public. I have been very fortunate to meet many flood professionals at the state, regional, and national level, and am simply humbled by their passion, diversity, and knowledge, but the program needs more foot soldiers (i.e. professional consultants) rendering product and education to each local community.
National Association of Realtors, (2014). Realtors applaud speedy senate action on bipartisan flood insurance affordability bill. Retrieved from http://www.realtor.org/news-releases/2014/03/realtors-applaud-speedy-senate-action-on-bipartisan-flood-insurance-affordability-bill
Maine Association of Realtors, (2014). Bipartisan deal reached to delay flood insurance premium hikes: Waters. Retrieved from http://www.mainerealtors.com/articles/83-221/bipartisan-deal-reached-to-delay-flood
