Getting a Flood Cert or Flood Certification on a Property

Protect your client in a cash deal with info on how to get this done.

Waterfront real estate niche.
Know the special rules and considerations of selling waterfront real estate. (c) Photo: sxc.hu

Simply defined, a flood cert or flood certification in real estate is a document that states the flood zone status of real property. FEMA (Federal Emergency Management Agency) flood maps are examined using the address or geographic coordinates of the property. Using the location on the map, the flood certification provider certifies what, if any, flood zone in which the property is located.  If it is in a flood zone, federal flood insurance is required.

In purchases where there is a lender involved, the lender has a resource to accomplish this task. The fee is charged to the buyer in the 800 series items on the HUD-1 Settlement Statement. The lender is, of course, protecting their loan asset by verification of the risk of damage or loss by flooding. If the property is at risk, it doesn't necessarily preclude a loan, but flood insurance could be required.

You can access FEMA flood maps online, and there are many providers of online flood certifications in the links at the end of this article.

The flood certification is required by lenders, and generally there is no problem with the issuing authority or company and the report.  This is fine when there is a lender.  However, in practice, you can run into a situation where you must help your client to contract for a flood certification to list or sell their property.

In one example case, the real estate professional had a client who built spec houses and then would list with the broker.

 Because one home was on a piece of land that was bordered by an arroyo (in New Mexico), there was a need to check early to see about flood certification, as it would impact construction.  The builder/seller would rather take care of any flood issues in the construction phase to end up with a home that would satisfy lenders.

 He had purchased the land with cash.

The client and broker discussed the situation and decided to have the broker order a flood certification that could be taken to the county to get a building permit.  So, there was a necessity to get this done or construction couldn't begin.

Generally, only an address is necessary to get a flood certification from a certified company, but this was a newly subdivided piece of high desert land, and there was no nearby address that was acceptable.  So, the broker contacted a surveyor to ask how they could get the flood cert.  The surveyor advised that the flood cert company would accept a set of GPS coordinates, but only if they were determined via the approved method.

The requirement was to get two GPS readings.  One was required at a nearby mapped major intersection of streets or highways that could be referenced by the flood cert company.  Then the other would be taken at the lot, and the company could then properly orient the property on the flood map.

The broker took the readings, one standing in the middle of a busy highway.  He lived through that and did the other reading at the lot.  The flood certification form was filled out and submitted.  The certification came through quickly, stating that the lot was not in the 100 year flood plain.

 This should have been enough, as this would be the form filed with the county to get the building permit issued.

Unfortunately, the bureaucrat was not in the mood to be customer friendly.  She stated:  "I'm the one in charge here, and I'll tell you what's going on.  I've paced off the distance of the proposed slab from the arroyo, and it is in the flood zone.  I don't care what the flood certification says!"

So, the client had an extra several thousand dollars in cost to elevate the slab to accommodate being in a flood zone.  The interesting thing is that when the home was finished and a buyer came along, their lender ordered a flood cert and the lot was not in a flood zone.  

Sometimes you just have to go with the bureaucratic flow.