The Privacy Act of 1974, while laudable in its aim to provide citizens with rights to control the federal government’s use of personal data, should not be used to prevent homebuyers from learning about flood claims filed by the seller of a home listed for sale.
Once a property is listed for sale, any right to privacy of the seller regarding flood claims is outweighed by the consumer’s right to know the history of flood damages to the property.
If you want to buy a used car, you want to make sure that the car has not been in an accident or been flooded. This only makes sense. Doing due diligence is important to our pocketbooks.
But, the information scales are usually tipped in favor of the seller. As far back as1984, computer professional Ewin Barnett III was determined to balance the consumer information scales in car buying. In that year, he founded Carfax.
Initially, the idea was to combat odometer fraud. Fast forward to 2019 and almost no one would buy a used car without checking the Carfax. It discloses odometer fraud, accident claims, service records and more.
A car buyer can easily find out if a vehicle had an accident or was flooded and, if an insurance claim was filed. Not so with the homebuyer. Why is this the case in 2019?
In some states, there are seller disclosure laws and regulations, but, not in every state and, these laws are imperfect. Typically, the seller is required only to disclose: “what the seller is actually aware of.”
So, if a seller purchased the property after a flood, then he may not have knowledge of the flooding, outside of what was disclosed to them when they purchased the home.
While some states require sellers to disclose flood damages or flooding in the area, they do not require disclosure of the property’s detailed flood insurance history. That would reveal exactly how risky and expensive it would be to live there.
For the homebuyers to access flood insurance claims history, they must request that the seller order and provide them with a Comprehensive Loss Underwriting Evaluation (CLUE Report) from LEXIS/NEXIS. Also, if the property was listed in the MLS after a flood, the “past listing remarks” may comment on whether the property flooded. All Realtors have access to the property archive report for each listing in the MLS.
Most prospective homebuyers do not know about the archive report or know to ask their Realtor to check the MLS archives.
Why is it so easy to get accident and flood information about a used car and so difficult to get this same information about a home?
Citing the 45-year old Privacy Act, FEMA says that it can’t reveal a property’s flood insurance claim history to anyone other than the homeowner, and the owner must request it in writing.
The law also applies to local governments that participate in the National Flood Insurance Program (NFIP). Local authorities must keep track of properties that have filed multiple insurance claims for repeated flood damages, called repetitive loss properties. But, the Privacy Act prevents local governments from sharing the addresses with the public.
So, while the government knows where all the riskiest properties are, the homebuying public has no way of knowing. This a raw deal for consumers and, the 1974 law needs updating.
On June 11, FEMA published data covering more than 2 million flood insurance claim records going back to 1978.
While FEMA touts that “this is a giant leap toward helping scientists, policy-makers, and the public understand how the National Flood Insurance Program (NFIP) works, where flood damage occurs, and what the costs are to the nation,” it is really “half a loaf” that does little to protect consumers.
Which homebuyers will know that this dataset even exists or how to access it?
As useful as these data will be to insurance companies, they are of very little use to consumers. The newly released FEMA dataset does not include the exact addresses of affected homes, to “protect policyholders’ privacy.”
It does include ZIP code-level data on where policyholders received payments. However, FEMA’s interpretation of the Privacy Act makes it difficult and sometimes impossible for a prospective homebuyer to learn the full history of flood risk for a property, as this South Carolina Post and Courier article points out.
The Privacy Act has restricted consumer access to critical information on the flood claims history. This makes homeownership riskier for prospective homebuyers. If Americans can easily find out the claims history of the used car, then they should also be able to find information about a much more financially significant investment – the family home.
Albert J. Slap is the President of Coastal Risk Consulting, a flood, natural hazard and climate impact risk assessment tech company in Boca Raton, FL. For further information, contact: firstname.lastname@example.org; www.floodscores.com; 844-732-7473.
“The Invading Sea” is part of the Florida Climate Reporting Network, a collaborative of news organizations across the state focusing on the threats posed by the warming climate.