New Residential Real Estate Flood Disclosure Requirements and Potential Market Shifts

As of October 1, 2024, Florida law now requires sellers of residential real estate to disclose certain information as it relates to past flood insurance claims. It is important to be aware of this new requirement, as it impacts all residential real property transactions, including new construction, and does not differentiate between vacant or improved lands. Additionally, sellers are required to make these disclosures at or before the time of executing a contract. 

The text of the required disclosure is included in the statute, and must inform buyers of the following: 

– Flood Insurance Disclaimer. Clarification that the homeowners’ insurance policies do not include coverage for damage resulting from floods. 

– Flood Claims and Assistance. Whether the seller has filed a claim with an insurance provider or received federal assistance for flood damage to the subject property. 

The new Florida law requiring flood risk disclosure for residential real estate transactions is likely to have several significant impacts on the state’s real estate market:

Increased Transparency

The law mandates greater transparency in residential real estate transactions by requiring sellers to disclose flood-related information. This includes:

• A flood insurance disclaimer stating that homeowners’ insurance does not cover flood damage
• Information on whether the seller has filed any flood-related insurance claims
• Disclosure of any federal assistance received for flood damage

This increased transparency aims to help buyers make more informed decisions about properties they are considering purchasing.

 

Potential Market Shifts for Residential Real Estate

Impact on Buyers

• Buyers will have access to more detailed flood risk information before purchasing a property.
• This may lead some buyers to reconsider properties in high-risk flood areas or negotiate prices based on flood risk.
• Buyers may become more aware of the need for separate flood insurance policies.

Impact on Sellers

• Sellers will need to gather and disclose flood-related information about their properties.
• Properties with a history of flooding or in high-risk areas may face increased scrutiny from potential buyers.
• Sellers may need to adjust pricing strategies for properties with significant flood risks.

Residential Real Estate Industry Adaptation

• Real estate agents and brokers will need to familiarize themselves with the new disclosure requirements.
• The industry may see an increased focus on flood risk assessment and mitigation strategies.
• There could be a growing demand for flood risk expertise among real estate professionals.

Long-Term Market Effects

• The law may contribute to a more resilient housing market by encouraging informed decision-making about flood risks.
• Residential real estate property values in flood-prone areas could potentially be affected as buyers become more aware of risks.
• There may be increased interest in properties in lower-risk flood zones.

 

Insurance Considerations in Residential Real Estate

• The law is likely to spark more conversations between buyers and sellers about the importance of flood insurance.
• There could be an increase in flood insurance policy purchases, especially for properties in moderate to low-risk areas.

By mandating these disclosures in all residential real estate transactions, the new law aims to create a more transparent and informed real estate market in Florida, particularly in light of the state’s vulnerability to flooding and extreme weather events.

There are a few key exceptions to the new flood disclosure requirements in Florida:

• The law applies broadly to residential real estate transactions, including new construction and vacant land. There do not appear to be major exceptions mentioned for residential properties.
• While not an exception per se, it’s worth noting that the law does not specifically require disclosure of past flood damage if no insurance claim was filed. However, sellers are still generally required to disclose anything that could knowingly affect a property’s value.

Conclusion

It is imperative that listing agents discuss these new requirements with their sellers to ensure they are prepared to properly disclose and to avoid liability. If you have any questions or concerns, please contact our office and speak to Jared Trent, attorney with Chiumento Law. We are always here to assist, as we are here for you when life happens.