Do You Have to Disclose Flooding When Selling a House?
Consider the following case. You need to sell your current home because you need to relocate for your job. Soon, prospective buyers will begin to arrive. You mention the nice neighborhood, the good restaurants in the area, and the community pool, but you hold back on one detail:
The living room was destroyed when the house flooded four years ago during a hurricane. As a responsible owner, you made all the necessary repairs, but you are aware that it might happen again. Before moving out, you have a few months to sell the house, and you’re concerned about scaring off potential buyers. Your real estate agent advises against bringing up the flood, especially since it was fixed and the house is structurally sound.
- How do you proceed?
- Do you have to warn potential customers , even if it means scaring them off?
- Can you leave out damaging details that haven’t even left a permanent mark on the property?
- After all, the flood happened a long time ago. Where does your duty to act morally end?
What a Disclosure Document is All About
Both home buyers and sellers may find a disclosure document to be crucial. When selling a property, it is common for the owner to put information in writing. Depending on state and local laws, the specifications change.
In general, a disclosure document is meant to give information about any flaws in a property that might lower its value. Sellers who knowingly withhold information risk legal action as well as possible criminal conviction. Even if a seller is selling a property “as is,” they usually still have to tell the buyer what’s wrong with it.
Anyone selling a home may be affected by disclosure laws. Even so, they are particularly likely to have an impact on real estate investors who buy houses to renovate and then sell them for a quick profit. Flippers in real estate frequently deal with damaged properties.
Local laws vary
A homeowner is required by law to tell people who are interested in buying their home about certain facts and risks. State-specific disclosure laws differ, but the most typical ones cover hidden dangers like asbestos and lead paint. As strange as it sounds, in many states, sellers are also required to tell buyers if the house has ever been the scene of a murder or if it has a history of being haunted.
Should sellers notify buyers of flooding?
Unfortunately, the solution to this question is somewhat convoluted. Everything depends on the type of home you’re selling and the state in which you’re selling it.
In general, there are two ways to hold someone accountable for failing to disclose the risk of flooding. First, if sellers are aware of the risk of flooding, some states require them to disclose it (like California).
Second, the buyer may sue you—and succeed—for failing to warn them about the risk, even if your state does not require you to do so.
Disclosing Flooding History
There is no federal rule about telling people about flood history, and state rules are very different. A few more states have laws that experts deem too weak or vague, and more than one-third of states have no flood disclosure laws at all. Among the bottom five states with the highest coastal population density are Florida, New York, and New Jersey. Other offending states include states with dense populations, like Virginia and Georgia, as well as states with a long history of riverine and ocean flooding, like Missouri and Maryland.
Even worse, there is no way for homeowners in these states to determine whether a home has flooded. The Federal Emergency Management Agency, or FEMA, keeps a database of flood maps that anyone can use to find out if their home is in a flood zone and, therefore, if they need flood insurance. Even though many homes outside of these flood zones experience frequent and severe water damage, just because a home is inside a flood zone doesn’t mean it has ever flooded. For instance, more than half of all damaged homes in Texas after Hurricane Harvey were outside of FEMA flood zones.
Because of federal privacy laws, only the home’s current owner is authorized to ask to see the history of flood claims made against the property. This means that the seller of a home can keep that information from a potential buyer during conversations, unless a state law says otherwise. The buyer won’t know until he or she signs the final papers and becomes the owner of the home herself. A seller isn’t required to tell a potential buyer about sea-level rise projections any more than they are required to tell the buyer about the neighbor down the street who often plays loud music. However, there are some independent tools, such as the nonprofit First Street Foundation’s Flood Factor, that can shed light on an individual home’s risk.
The Ethical Obligation
The U.S. government should mandate sellers to disclose information about a property’s history with flooding and risk, as well as requirements that the owner maintain flood insurance, in order to aid homebuyers in making informed decisions.
Currently, sellers don’t have to tell buyers that their house is in a flood-risk area on a national level.
Families and their property may suffer horrendous consequences as a result of this lack of transparency. Buyers need all the information they need to make an informed decision, especially when it comes to what is for many people the biggest and most significant purchase of their lives.
We think it is morally required of home sellers and their agents to address flooding. Even though most laws require sellers to tell buyers about “known defects,” there is no law that says they have to talk about the possibility of future flooding.
The Bottom Line
Sellers who have information about their home that could be concerning or upsetting to a buyer might want to disclose it, even if it isn’t legally required in your area. People have a reputation to protect, as well as a moral obligation to be honest with potential customers and a desire to avoid the cost and trouble of going to court. If a seller is not sure if they have told the truth about the property’s condition, they should talk to a real estate lawyer in their state.