Home Sales Need Better Disclosure of Flood Risk, Experts Say

An expert federal panel has added its voice to the growing campaign for laws requiring homebuyers to be informed about a property’s flood history, calling current disclosure practices “not adequate.”

A Federal Emergency Management Agency advisory panel says in a new report that prospective buyers cannot “make a fully informed decision” about whether to buy a property in states that do not require sellers to disclose flood history. The disclosure can help buyers determine whether a property has been previously damaged by flooding, is at risk of future flood damage and whether new owners should buy flood insurance.

“Though the real estate industry requires disclosure of anything that could affect a buyer’s decision to purchase … seller disclosure as it pertains to flood risk is not adequate,” FEMA’s Technical Mapping Advisory Council said in its latest annual report. “This often results in a ’buyers beware’ scenario.”

States are increasingly enacting laws requiring some type of flood disclosure during a real-estate sale. But in the 29 states with requirements, the disclosure “is often extremely deficient” and lacks “valuable information” about a property’s flood history, the 20-member council said in its 2020 report, approved last week. The council, composed of national experts on flooding, advises FEMA on its flood mapping program.

The council’s support of strong flood disclosure could boost efforts in Congress to compel states to enact disclosure laws. Lawmakers are likely to address the issue this year as they attempt to overhaul FEMA’s National Flood Insurance Program, which sells most of the nation’s flood-insurance policies.

A 2019 Senate bill sponsored by six Democrats and four Republicans would have forced states to enact disclosure laws by barring FEMA from selling new flood policies in states without disclosure.

The council said FEMA should act on its own and “incentivize” states “to expand and enhance” flood disclosure.

The council did not specify the incentives FEMA should use to encourage flood disclosure. Incentives could include federal grants, discounts on flood-insurance premiums in states with disclosure laws and bonus points in competitive grant applications for states with disclosure.

FEMA also could “work closely with states … to ensure the uniformity and adequacy” of disclosure laws, the council said.

Flood-disclosure laws vary widely across the 50 states, according to a survey last year by the National Association of Realtors.

Flood disclosure is not required in some of the most flood-prone states such as Florida, although Florida Realtors has created a voluntary disclosure form that includes questions about a property’s flood history.

Laws in some states are vague about flood disclosure and require sellers generally to disclose defects and hazards, which can be interpreted to include flood risk.

States such as Louisiana and Texas have strong flood-disclosure laws that require sellers to provide detailed information about flood history and location in a flood-hazard area.

The FEMA advisory council said state laws should require flood disclosure “early in a real estate transaction.” In all but two of the 29 states with flood-disclosure laws, prospective buyers don’t get information about flood risk until after they have made a purchase offer, NPR reported in October.

Disclosure advocates such as the Natural Resources Defense Council and the Pew Charitable Trusts say flood history is particularly important for people considering buying homes that FEMA flood maps depict as being outside a high-risk flood zone. Federal law requires many people who own property inside the flood zone to have flood insurance while exempting all property outside the zone from the insurance requirement.

However, FEMA flood maps are widely known to be inaccurate, which the advisory council said gives the public “a false sense of security” about where flooding might occur.

“Individuals and communities must be given more than flood hazard maps,” the council said.

Reprinted from E&E News with permission from POLITICO, LLC. Copyright 2021. E&E News provides essential news for energy and environment professionals.

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