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Floodplains: How Your Home Insurance Cost Can Skyrocket Overnight

Ryan Rodenbeck

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Ryan started in Austin real estate as an investor in 2001. He looked at all investment opportunities — Austin foreclosures, condos, homes for sale...

Dec 12 14 minutes read


John: Welcome to the Austin Real Estate insider where we tackle all the issues that buyers and sellers in the Austin area encounter. I'm John McCarthy and I'm joined today by Kristi Hassey and today we're going to talk about the upcoming changes to FEMA flood plain map and how these changes can affect the value of the home that you live in now and if you're buying a home, how it could potentially affect the future value of the home that you were buying. Join us in a second. Okay. Before we begin, don't forget to like and subscribe to our Facebook Live by commenting home below. And if you're watching this on youtube, be sure to like and subscribe. Follow us on Instagram @spyglassrealty. So, you know, we're just gonna dive right into the flood plain stuff. Kristi?

Kristi: Well, hi how are you?

John: So Kristi went to a, a presentation to learn pretty much everything that we need to know. So, I know that you've got some really, really interesting things to give us. I think there's, there's a lot of points to this and impacts a lot of people and we're going to give a very kind of, condensed version of this and we'll share some information and links to some more of this. You can dig deeper into how this could affect you. So Christie, I'll let you go ahead and take it away from here for a little while.

Kristi: So it's called atlas 14 and it is coming to Austin and we're actually in charge of creating the maps for FEMA so it will affect quite a few different aspects of buying and selling and essentially what it's doing is switching the 500 year flood plains to 100 year, which is going to effect of roughly about 4,000 buildings. So yeah. So do we have a couple slides So you’ll be in the comment section below so they can look at those.

John: So I'm a one interesting fact that is part of it is that in a hundred year flood plain you are, you have a one percent chance of having a being in a flood every year, but a 26 percent chance of being in a flood throughout through the whole 30 year mortgage. So that's one inform or a little bit more so. And you know, it's just something to think about. I mean I'm impervious cover changes year to year and we need to seriously consider our flood risks and then think about it in the sense of buying and selling as well.

Kristi: Yeah, that's interesting because then that brings in the mortgage perspective and the risk assessment they have to take. And I'm sure that's going to affect the inability for the property and even interest rate. And because they're really good touch points.

John: Yeah. So here we go. That's happening with that is we are development is going to have to change. We're going to, in those flood areas, they want you to be two feet above the flood plane. It used to be one. So that's a significant change. They also aren't going to allow you to build another home within the flood plain. You can replace an existing home if it's two feet above the flood plain, but they're not going to allow you to do anything.

Kristi: Anything new on the ground. Right.

John: So people that own a home now we're thinking in a few years they might want to add on square footage or put a second dwelling on the property in a few years from now. They just won't be able to do that. Is that what you're saying?

Kristi: Yes. Well when they add on, it has to be two feet above. Even if the existing property is not the ad on has to be and they can't increase the number of dwelling units. That's correct. They can replace an existing one, but they can't increase the number, so yeah, that's pretty significant. And then that two feet, it's called two feet of free board requirement. Freeboard is just your base level that has to be two feet above flood plain now. So yeah, it's quite a bit for the Colorado River, it's just not included in this. Basically that's Lcra his domain and, and they're not touching it, so.

John: Wow. So, let me recap on that for a second. You're saying these flood plane maps and what's going to be coming from FEMA and the changes from. It's more local like lakes, rivers and streams, but it doesn't include the Colorado River, which is the biggest body of water we have in this region.

Kristi: Right. We have all the dams as we, as we recently figured out that when we release water from the dams then it floods, but it's completely controlled. I think there's somewhere around 20. I’ve personally been through the buyout process, Speaker 3: a flood plain buyout on two different homes. You know, it's, it's quite a process and it was done by watershed protection. Theyy do, you're right. I mean they did a good job, but  it's still quite a process. It takes a long time. So it's something to consider obviously when you're buying a home.

John:Yeah. Wow. Kristi, I want to take an opportunity here to kind of go a little bit further, kind of specific about how this could affect people, the affordability of homes and even at competition on the market because we know with this in the mortgage per se perspective, there's an increased risk and I think from the insurance perspective as well, and we actually have a guest insurance agent today that's going to join our show, Reqs Malin, and he's going to give us a little bit of insight as to how these changes could affect future buyers and affordability.

Reys: Thanks for having me!

John: So, you know, you and I've talked about this a little bit and it was very interesting, some things that you had to say about how this could affect affordability and things from the insurance side. And I wanted to get your, get your perspective on that.

Reys: Speaker 4: So interestingly, what you were talking about earlier about the difference between the major bodies of water and small creeks. And streams and things like that, something that we're kind of talking about previously was a nowadays is something that a lot of people are failing to take into consideration is that it's not in the flood risk is not entirely mainly with bodies of water. It is those drainage streams that ends up causing a lot of these flood waters. Because one thing that we haven't really addressed when it comes to flood insurance is if they have the elevation situation mapped out just fine, but the more that we construct the more concrete parking lots that we build, the more apartment complex that get built in the Austin area, the less ground soil there is in order to absorb that water. So what that means is more and more of that water gets diverted into these drainage streams. And when these streams don't get dredged on a basis, they don't get wide, but they don't get deepened. They cannot handle the amount of volume that goes through. And ultimately the body of water that they drain into gets backed up because water will go the path of the least resistance. And if that means right into your home, then it will go that direction. So, I wanted to touch on that what you were mentioning earlier.

John: Yeah. So people that don't think they need flood insurance because they're not in a flood plain, they maybe in an area that all the flood plain waters they drain into and they could flood upstream. Is, is what it's all about. Like if it, if it, if there's a development that's upstream that affects it, then you could all of a sudden you could be in a flood plain. So we're going to ask you a question on that real quick.

Kristi:  So someone's looking at a home now to purchase, it's not in the flood plain and their insurance is going to be x. well, let's say in five years that same home is now in 100 year flood plain. Their insurance is going to be x plus whatever it is. What's the difference there that you can tell us Because I think that could be really big as if someone could even afford that house in the future in that price range.

Reys: Right So there's two things in regard to answer your question. Number one is with an insurance policy, if you purchase that insurance policy prior to the flood map being withdrawn, as long as you continue to pay for that insurance policy, it will never be adjusted. So you essentially get grandfathered in a to any flood plain that they just happened to redraw. So if you're not blood done and the maximum policy is around 450 to $500 the maximum policy, as long as you continue to pay for that policy every year, that is what you will pay every single year. Your premium isn't going to change when they redraw that college, when they would draw the maps. That's point number one. But number two. Yeah. So number two is, you know, if you are looking at buying a home after the after the maps get, we'd get redrawn.

Reys: if you're buying a house in a high risk area, I'm like a 100 year flood. You're looking at potentially maximum risk policy. And realistically that policy could be in the range of 500 to 700, $7,000 annually now. Yeah. So the mortgage company includes home-related insurance policies in their housing expense calculate. So if your cornea has a questionable debt to income, if they sitting on that, on that fence about whether or not their debt to income can carry it, or if the housing expense is too high a flood insurance policy like this, if they're purchasing the policy after the map has been withdrawn, it could make a make or break a sale for your client if they're taking a look at the. That kind of extra income expense.

John: Yeah, that's incredible. That's going to make a huge impact when these get redrawn and the affordability. And that's a big question. So, and I think in a minute we'll be able to show an overlay of the map. Christie's that right We have that available or is that down below that We can show it.

Kristi: I think it's down below. Below. Great.

John: Well thank you. I really appreciate you coming on the show, the feedback and looking forward to seeing you in Austin soon. All right Kristi. So I'm going to, I'm going to pull up one of those, couple of those little sides again and see if there wasSpeaker 2: that's so crazy. We talked about how many dwellings this affects every year or this is going to affect with your lats, their selves and then lots that have actual dwellings on them.

Kristi: What kind of numbers do we have There are 3:30, 200. I guess that what, what it is. Like I said they're going 500 year flood plains are going to be turning into a hundred year flood plain. So the difference there and that's what we have currently of course, you know where Austin is growing really fast, so I think probably 4,000. It's probably even a better number of what's possibly going to be affected and I think that's commercial and residential and everything, but yeah. And Yeah, when you go with flood flow, you can actually, you click on I'm more, or what is it Hold on here. You Click on where it says changes for atlas 14 and you can see this overlay and it will show you what we have currently. And then the purple is just a little bit, you know, a little bit more. So it's showing you what we're going to have in the future. And this, this starts happening. I mean, they're going to be voting on this. The city council will be voting on this and a couple months,but it doesn't go into effect until 2022. And we'll put a link up to, because that's grant's a great resource there. And people ask us all the time as, as real estate agents. So what's the  flood zone Is it in And I think everybody goes, we all go to the same source. So whether you google it or whatever and it brings you to flood pro and that's the source of it. So, this is going to be an ongoing concern with rising waters and flooding, you know, it's affected us a tremendous amount here in Texas and Louisiana where were Rey’s. And it's important for people to understand this because from the housing perspective, you know, we keep building, we do run out of land and water runs out of places to go when it goes into people's homes and it affects the future of the industry is well affordable. Yes. It's definitely not just crazy weather even though we're having that as well. But flooding happens in it, it happens in cycles in Texas. I mean,  I've seen charts, you know, where they show, like look, you know, flooding is a very regular thing and then we have drought and then we have flooding. We're a period of flooding now and of course, you know, just what was it, 2005,  it was, it was at three year drought and I thought it would never ran again. And here we are, every, all the lakes and rivers are full and like five days. Right Of course. And like you're saying, and the development people just keep their coming to Austin, you know, for, for all sorts of great reasons, but it does affect flooding.

John: So it's, it's almost imperative it has to change in some respects here because there's just so much development everyday developing in developing, in developing in this area. Well, you still there, Kristi I think that's a wrap for today. I'm from the Austin Real Estate Insider, so don't forget to like and subscribe to our Facebook live by commenting “home”. And if you're watching this on youtube, be sure to like and subscribe and also follow us on IG @spyglassrealty.

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