Expert: Karyn Foley - 1/2/2009

Question
I purchased a residence in Aug. of 2007.  In Sept. the loan was sold to a bank by the original lender.  A few months later I was notified by the bank that my property was in a special flood hazard area and I would have to carry flood insurance.  The original lender had a contractor do the flood zone research and they provided a flood certificate at closing stating the property was not in a flood zone.
My problem is the cost of the insurance was not in my budget and is making it hard to make all ends meet.  I contacted the original lender and they say they have no responsibility in the matter.  
I checked with the zoning commission in my county and they say the property has been in a FEMA flood zone since 2003.
My realtor has also said that they value of the residence has been significantly reduced due to the flood zone determination.  Does the original lender have any responsibility?

Answer
Dear Richard:  The contractor who did the research should be held accountable.  I would strongly suggest you get your receipt for what you paid for that information, or any documentation acknowledging that the lender referred or assigned that contractor the responsibility for the research, and sit down with the lender and show him your paperwork.  If the lender still does nothing, I would immediately contact a real estate attorney.  You might wish to tell your lender that is your next option.  If you do not have any paperwork to prove that situation, you may be in for a problem as all real estate contracts and accompanying paperwork must be in writing.  Please also go to your realtor.  The fact that the property was reduced has no bearing at all on this situation.  Most states have mandatory disclosure laws; It is imperative that you call your local real estate board or state department of real estate and find out what those laws are.  Your realtor was your representative and should have made certain that you received and formally acknowledged, in writing, that you were aware of the local, country, city, and state disclosure laws and you should have signed them and be given a copy.  If you knew about the flood zone determination you may not have support for your case.  Again, go to all parties involved in your transaction, and then contact a real estate attorney if you feel you have a solid leg to stand on.  Your realtor's office owner or office manager should be in on your discussion with your realtor.  Make certain you bring paper and pen to all of your meetings and write down everything they say.  That shows you are determined to get to the bottom of the problem and are ready to go forward with finding the party or parties responsible for this situation.  Letters from attorneys sometimes work wonders.  Good luck, and let me know what happens.  KARYN FOLEY