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The NEW RISK FACTOR You Must Disclose to List a Property

If climate change could potentially increase the risk of flooding in your area, be prepared to disclose this information if you want to list your property on Realtor.com. The listing site now requires sellers to “disclose information about a home’s flood risk and how climate change could increase that risk in the coming decades,” the website announced last week.

Currently, 29 states have some degree of flood-disclosure requirements. Homeowners who want to know if a property has previously flooded can also access the Federal Emergency Management Agency (FEMA) to see if their potential purchase is on the list of properties that received payouts from the National Flood Insurance Program (NFIP). However, if the home did not have flood insurance or if future climate change is potentially going to create a flood risk in the future, it is unlikely that this information would be accessible or available. Furthermore, it is unlikely the seller would have any idea they should be disclosing any type of flood risk whatsoever (nor would they want to).

According to Realtor.com, about 110 million home listings on its site now include “publicly and privately assembled flood risk information,” meaning the listings may include information from public record and from private flood models possibly in use by insurers or banks. Realtor.com plans to publish “flood risk scores” derived from a privately funded and created database that ranks properties as a flood risk on a scale of 1 (no risk) to 10 (highest risk).

“The more transparent we can be about these properties…the more consumers will trust us,” explained senior vice president of product at Realtor.com Leslie Jordan. The Association of State Floodplain Management warned the transparency could be misleading, however, noting the model in use on Realtor.com “underestimates flood risk for some properties and overestimates it for others.”

For now, Realtor.com remains the only website publicly pushing this particular type of disclosure. Listing sites like Zillow and Redfin offer a variety of surveys and research, including analyses of how climate change could affect housing markets nationwide. However, Taylor Marr, lead economist at Redfin, warned that providing information that overestimates flood risk could hurt existing homeowners. “Could this essentially take away a lot of their net worth?” she asked.

Do you think flood risk should be a mandatory disclosure and, if so, how should it be evaluated?

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