NC doesn’t require home sellers to disclose previous flooding. Should that change?

A North Carolina home seller does not have to tell a potential buyer if the property has flooded, something environmental groups are asking the N.C. Real Estate Commission to change.

“As a purchaser you should get information that the buyer has that could really impact you financially down the road. We think it’s a fairness issue,” said Brooks Rainey Pearson, an attorney at the Southern Environmental Law Center, which is representing the Natural Resources Defense Council and other petitioners.

North Carolina’s current disclosures are inadequate, according to a NRDC analysis of requirements across the country. Right now, the standard form a seller fills out only includes information about whether a home is in a federally designated floodplain or faces a known flood hazard.

Petitioners want the standard disclosure form to include questions about whether a property has flooded before, how frequently those floods happened, if an insurance claim has been filed for flood damage on the property and whether the property is covered by flood insurance.

The petitioners argue that such information would help a buyer better understand a property’s true flood risk and take steps to protect themselves. In fact, they say, whether a home has flooded before is a better indicator of its future risk than whether it sits in a federal floodplain.

They also want disclosures to offer information about whether a property has ever received federal disaster assistance from agencies like FEMA or the U.S. Small Business Administration. If a property has received the money in the past, a buyer would need to purchase flood insurance to be able to access federal money in future disasters.

The N.C. Association of Realtors is aware that the petition has been filed, but hasn’t taken a stance on it, Mark Zimmerman, the trade association’s senior vice president of external affairs, wrote in an email.

Elsewhere, the real estate industry has a mixed record of supporting required disclosure, said Joel Scata, an NRDC senior attorney.

The industry opposed mandatory disclosure in New York, where sellers can provide a $500 credit instead of disclosing information about the property. But Realtors supported requiring sellers to disclose a home’s flood history in New Jersey and Texas, both of which have been hit by widespread flooding in the past decade.

“When people buy a previously flooded home, are never told about it, and then it floods, it really puts the Realtors at risk and makes it clear that the market’s not working the way it should be,” Scata said.

Last year, the NRDC asked actuarial firm Milliman to analyze how much damage the owners of New Jersey, New York and North Carolina homes that have previously flooded can expect to incur.

Milliman found that the owner of a previously flooded North Carolina home can expect to suffer an average of $36,328 in damages during a 30-year mortgage.

In the Raleigh-Cary metropolitan statistical area, 8,856 single-family homes have flooded, or about 2.5% of the available inventory. According to Milliman, homes that have flooded face an average of $55,800 in flood losses over the next 30 years compared to $1,860 for homes that have not flooded before.

And in the Durham-Chapel Hill Metro area, the NRDC analysis found that 2.8% of single-family homes have suffered flood damage before. Over the course of a 30-year mortgage, those properties risk about $40,000 more flood damage than those that have not flooded.

Scenarios where climate change produces heavier rainfall significantly increase the risk for homes that have flooded before, according to the Milliman analysis, a scenario where temperatures warm 7.2 degrees Fahrenheit by 2100 would mean that previously flooded homes in North Carolina face an average of $61,025 during a 30-year mortgage.

Louisiana has the strictest flood disclosure policies, according to a FEMA analysis, requiring sellers to tell buyers about previous flooding, previous disaster aid and any flood insurance carried by the property. By comparison, South Carolina requires sellers to disclose information about whether a home is in a floodplain, if it has an active flood insurance policy and any previous flooding damage or flood insurance claims.

“Other states are catching up to the changing circumstances due to climate change. We’re seeing flooding in areas that didn’t used to flood and maybe these disclosures weren’t really needed in the past,” Rainey Pearson said.

Other groups involved in the petition include MDC Inc., NC Field, the N.C. Disaster Recovery and Resiliency School, the N.C. Justice Center and the Robeson County Church and Community Center.

The N.C. Real Estate Commission’s agenda last week included discussion of the petition, but the discussion was delayed until at least February.

The commission must either grant or deny the petition by March 31.

This story was produced with financial support from 1Earth Fund, in partnership with Journalism Funding Partners, as part of an independent journalism fellowship program. The N&O maintains full editorial control of the work.