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This article is the winner of the Real Estate Valuation manuscript prize (sponsored by The Appraisal Institute) presented at the 2000 American Real Estate Society Annual Meeting.This study examines the valuation of homes located within 100year flood plains. Utilizing a database of 29,887 property transactions in Alachua County, Florida, the results of this investigation suggest that comparable characteristic homes located within a flood zone sell, on average, for less than homes located outside flood zones. Interestingly, the price differential is less than the present value of future flood insurance premiums. In addition, the price differential is shown to have increased since passage of the National Flood Insurance Reform Act of 1994. Finally, it appears that property tax assessors have slightly overassessed properties located in flood zones relative to those in other areas. The large database and the lengthy period of analysis (1980-1997) are much broader than that of previous research efforts.
Harrison et al. (Mon,) studied this question.