As extreme weather events grow in both frequency and severity across Canada, flood disclosure is a developing into a major concern. But the expectation that sellers voluntarily reveal that information is misguided at best.

Daniel Henstra, an associate professor in political science at the University of Waterloo and a senior fellow for the Centre for International Governance Innovation, has a solution: Third party disclosure management.

“We suggest a third party should be involved in identifying what the flood risk is on particular property parcels, partly because there’s this ambiguity and there’s no legal liability conferred here,” he told REP. “It would also get over perceived conflict of interest. If there’s no evidence (a property) is in the flood zone, nobody will say anything, and if this comes out later it creates all kinds of problems where the buyer tries to go after the selling realtor, or the seller, to say they concealed information. We need to have an open discussion about this.”

The Multiple Listings Service is owned by the Canadian Real Estate Association, and Henstra believes that’s an asset.

“The MLS would be the logical place where it would link to flood risk maps and flood risk information, like with the walkability score and school rankings,” continued Henstra. “It could be an add-in to the MLS. It’s value added to the users, and it’s buyers who are primarily looking at the MLS.

“So it’s a proprietary product, which means it’s probably regulated federally.”

Moreover, he suggests flood maps be made available to the public.

Sellers are perhaps understandably reticent about revealing antecedent flood damage, as well as immediate risk, but studies have shown that while there’s a temporal drop in value, it recovers.

“All empirical evidence on this shows once flood risk is revealed through maps or flood disclosures, or an actual flood, there’s temporary and marginal decline in property value,” said Henstra. “And then it recovers.”

Rosie Gimeno, a sales representative with REMAX Specialists Estate Group, agrees with Henstra, adding that disclosure of all kinds is imperative in real estate.

“Everything is buyer beware,” she said. “If an area is prone to flooding and the agent didn’t disclose that, then it’s problematic. I think that makes a third party essential, and it’s a great idea. Homeowners shouldn’t be opposed to this system, because if you look at Florida, they have hurricanes all the time and people still flock there.”

In fact, both agree flood insurance is a simple, if obvious, precaution to take.

“The research done in this area shows it doesn’t affect property values,” said Henstra. “They buy the home, but right away they buy flood insurance as well.”

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