Wholesaling Flood-Damaged Houses in Texas

The short answer

Can you wholesale a flooded house in Texas?

Yes, but the flood history must be disclosed. Texas requires sellers of most homes to tell buyers about past flooding and flood insurance claims.

Since 2020 the Texas seller’s disclosure has included questions on whether the house is in a floodplain, whether it has flooded and whether the owner has filed a flood insurance claim or received federal disaster aid. Your seller should complete it, and you should pass the answers to your buyer along with your own notes.

The opportunity

Why Texas flood houses trade at deep discounts

Flood damage scares retail buyers and lenders, and floodplain rules can force a costly elevation if damage is severe. Many owners lack flood insurance or received less than the repair cost. Selling as-is to an investor is often the fastest way to stop paying a mortgage on a house they cannot live in.

Lead sources

How to find flood-damaged houses in Texas

• After the storm, then later. Mark streets that flooded, then reach out weeks later when owners have heard from insurers and know their options.
• Flood maps. Use FEMA flood maps and local district tools, such as the Harris County Flood Control District’s, to identify areas at risk.
• Permit records. Repair permits pulled after a flood show who is rebuilding. Houses with no permit and no work may be for sale.
• Buyout program lists. Some Texas counties run voluntary flood buyouts. Owners left out of a program may want another way to sell.
• Contractor and restoration contacts. Remediation companies meet owners who decide not to rebuild.

Your exit

What buyers need on a flood deal

Share the flood zone, the depth of water in the house, how long it stood and what has been removed. Buyers will ask whether the house is in a regulated floodplain and whether the city has made a substantial damage determination, because that decides whether they can simply repair.

Mold is the big unknown. If drywall and insulation are still in place, assume remediation and price it in. Texas requires licensed mold assessors and remediators for most larger jobs, which adds cost.

Step by step

How to start wholesaling flood-damaged houses in Texas

1. Ask about the water. How deep, how long and when. These three facts drive the repair cost.
2. Get the disclosure. Ask the seller to complete the Texas seller’s disclosure, including the flood questions.
3. Check the floodplain status. Look up the flood zone and ask the city whether a substantial damage letter was issued.
4. Estimate repairs. Include tear-out, drying, mold work and rebuild. See our repair cost guide.
5. Price for the buyer. Set the number with the MAO calculator and leave room for surprises.
6. Sign and disclose. Use a purchase contract and the written assignment disclosure Texas requires.
7. Close as-is. Assign to a buyer who has handled flood houses before.

A house in a Houston-area floodplain took about 18 inches of water. The owner had no flood insurance, owed little on the house and had moved in with family. Repair estimates came in around $105,000, and she worried the city would make her raise the house, which she could not afford.

You asked the city’s floodplain office, which confirmed the repairs were below the 50 percent substantial damage threshold, so the house could be repaired without elevation. The seller completed the Texas disclosure, including the flood history, and you signed at $62,000 with the written assignment disclosure.

A rehabber who has done dozens of flood houses paid $74,000 for the assignment, priced mold remediation by licensed contractors into his budget and closed in two weeks. Getting the floodplain answer in writing first was the turning point; without it, most buyers would have assumed the worst and offered far less.

Texas rules to know

Substantial damage and the 50 percent rule

Cities and counties in the flood insurance program must apply floodplain rules after a disaster. If repair costs reach about 50 percent of the home’s market value, the home is treated as substantially damaged and must usually be brought up to current floodplain standards, which can mean elevating it. That single letter can turn a repair into a rebuild.

Ask the local floodplain administrator before you price a deal in a flood zone. Buyers who know the house is not substantially damaged will pay more, and those who know it is will expect a lower price.

Learn it with a mentor

Review your first flood deal with us

Flood houses hide costs behind the walls. Mentorship students go over the scope and floodplain status with a mentor before they offer.

FAQ

Flood-Damaged Houses in Texas: common questions

Keep going

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