Property in flood zone - adjustment required??

[P.Johnson]

Subject is in flood zone A, comps are not. No comps available in flood zone. Adjustment required? Should adjustment be net present value of flood insurance over typical holding period??? There is no data available from my market to determine a fair adjustment. Help.

 

[Pamela Crowley (Florida)]

Hmmmm, I would say that if there is no data to find a justified adjustment, you shouldn't make one. Just do explain the issue and lack of data.

 

[Tim Hicks (Texas)]

100 year flood zone, 500 year flood zone? Has the city made improvements that don't make it a flood zone any more? It would still show up in the 100 or 500 year flood zone despite new city drainage. If it is really still a flood problem, then an adjustment would be needed. You need to find data somewhere of flood zone sales versus non-flood sales in the same area to properly reflect its effect. There is no section in the appraisal manual that says you must adjust $xxxxxx for a flood zone property. You are supposed to extract it from paired sales or like/kind properties. Surely you have a river or lake community around with flood and non-flood properties. What percent do they get affected? Just suggestions. You could do like many appraisers around here and pull a figure out of thin air based on their pedigree. Not recommended.

 

[Stone]

One of the key issues in appraising a house in the floodplain is determining if it could be re-built. If it is a house that actually gets wet on a frequent basis, this is a much bigger deal than a house that is basically in a theoretical floodplain. I have appraised houses that could not be rebuilt if they had enough damage to require a building permit. I think this is something that would possibly affect marketing time.

You can go back in time, or to nearby markets, and see if houses in the floodplain sold for less than comparable sales, or if they had comparable markting times. These sales may not be on your grid, but they could be valuable in understanding the market for your subject.

I would also be sure to explain if you make an adjustment, or if you do not. This is one of those "discuss, discuss, discuss" issues.

I have appraised properties in a part of this state where there is very little impact because so many houses are in the floodplain. However, in my local market, unless there is something remarkable (i.e. water frontage) many buyers would be a little shy about purchasing a property that frequently gets wet.

Good luck, I would be very interested to hear how this works out for you.

 

[Restrain]

I had to do one that was on stilts by the river in the 100 year flood plain. If destroyed, it could not be rebuilt as per Flood Regulations. Many homes are in flood plains and the various agencies are now saying that they will buy them out instead of continuing to repair them. I would check the local regs as to what the Flood regs are for the area. Also, is there a planned buyout for the area? Many cities are now clearing all flood plains. If it can't be rebuilt after flooding and the regs won't allow for repair, then the remaining life is the probability of a flood in the area, and that should be historically available.