Besides fire, a home flood is one of the worst disasters a homeowner can experience. Floods are devastating. Many people lose priceless possessions and have to deal with expensive cleanup costs and trauma that can last for years.
And while many thoughts go through one's head after a flood, one may be whether a disaster like this will decrease the home or property value.
In this post, we look at flood risk, how it affects your home's value, and steps you can take to mitigate the hassle, inconvenience, and cost of cleaning up after a significant flood.
Making Sense of Flood Risk
Floods can happen anywhere and aren't always caused by natural weather events. However, some parts of the country are more prone to flooding than others, and flood risk is ever-changing. The Federal Emergency Management Agency (FEMA) provides flood maps showing how likely an area is for a flood. FEMA uses probability and input from local communities and experts to calculate risk, which is why the flood maps may confuse some people because they may cite an area as high risk even though it's never flooded.
According to FEMA, flood zones are the land area that could be covered by floodwater. The agency currently places more than 20,000 communities in the United States into flood zone categories based on risk.
High Flood Risk Zones
FEMA designates high-risk flood zones as areas with a 1 in 4 chance of flooding during a 30-year mortgage, and they're designated on flood maps with the letter A or V.
Moderate to Low-Risk Flood Zones
In moderate to low-risk flood zones, the probability of a flood is reduced, and homes and businesses in these areas aren't required to carry flood insurance, although it's encouraged. These areas are designated on flood maps with letters B, C, or X.
Undetermined Risk
Areas designated as undetermined are those with no flood hazard analysis data; however, FEMA still says they are at risk of flooding and marks these areas with the letter D on their flood maps.
How Do Flood Zones Affect My Property Value?
Mortgage lenders and insurance providers use FEMA's flood maps to determine insurance requirements, and homebuyers may use them to assess value. However, according to a study published by Stanford University,
Across the universe of single-family home sales in the United States, we find in our preferred panel specification (n=5.65 million sales) that being zoned into the floodplain reduces property values by 2.1%.
This percentage works out to approximately $10,500 for a $500,000 home or $21,000 for a $1 million home.
However, the rub with this information is that not every state is required to disclose all of the information regarding flood risk, which means a property's perceived value could be higher than what's reasonable given the risk factor.
While a home in a high-risk flood zone will be worth less than one in a low to moderate-risk zone, what about a home that's already been flooded? How does that affect the resale value?
How Flood Damage Impacts Your Property Value
When considering a home's value, It's helpful to compare it to a car. Imagine you're looking to buy a car and seeing a beautiful model at the dealership. It looks pristine, but you discover it's been in an accident. Even if everything was repaired to like-new condition, you might be hesitant about buying it or want a significant discount.
The same goes for a home that's been flooded. Even if the damage was fully repaired and you would never know by looking at it there was a problem, the fact that floodwaters damaged the home makes it less appealing to buyers.
Or so you might think.
According to Forbes, real estate prices take a hit after a flooding incident. Still, the lower property valuation is only temporary. Many real estate investors target areas hit by hurricanes and other natural disasters because they can buy property cheap and sell it for significant profit once the market rebounds.
Reports show that home sales happen less frequently and at a lower cost immediately after a storm. Experts have reported that pending home sales drop by about 50% in Florida housing markets. However, as the study at Colorado State University found, this negative impact is short-lived. In Texas, after two months from the flooding left by Hurricane Harvey, 31% of residential neighborhoods saw an increase in median home prices."
Also, a story published by Chron.com regarding home values in the wake of Hurricane Harvey said that "homes that took in water for the first time will see their valuations drop, perhaps by as much as 60 percent. The story cites four academic studies showing that home values typically drop approximately 15 percent due to a flood. Like the Forbes piece, Chron.com says, "flooded homes tend to regain their value within four years on average."
Yes, flood damage will likely decrease your home's value, but most indicators suggest the devaluation isn't permanent.
Add Value To Your Home With EnduraFlood™ Flood Proof Basement Wall System
Stopping a flood when Mother Nature is involved is nearly impossible; the best thing we can do is to be prepared to deal with the aftermath as best we can and minimize the damage. One way to protect your basement and reduce cleanup time and cost resulting from flooding is by installing the EnduraFlood Flood Proof Basement Wall System.
If you've had flooding before, you know how expensive and time-consuming it is to replace wet drywall, which is where EnduraFlood comes in. The EnduraFlood basement wall system is designed to repel water in basements that flood. Instead of tearing out damp drywall and replacing it, EnduraFlood maintains its durability and water resistance for years.
Installing EnduraFlood dramatically cuts down flood cleanup. Once you've pumped out the flood water, and your basement is dry and clean, you can go back to everyday life more quickly without the hassle and expense of replacing saturated drywall.
And best of all, EnduraFlood is perfect for finished basements because it looks fabulous. Our wall panels are modeled after wainscoting — a traditional, contemporary design that adds warmth and style to virtually any room.
Find out how the EnduraFlood wainscoting wall panels can add value, style, and protection to your home by calling us at (551) 497-5938.