Table of Contents
Introduction
Real estate is no longer just about location. In 2025, buyers, sellers, investors—and increasingly, tech platforms and insurers—are asking a different question:
"What’s the risk tied to this property?"
This question isn’t just hypothetical. It’s being answered through climate data partnerships, flood zone assessments, historical designations, and even satellite imagery and AI modeling. From platforms like Zillow to insurance carriers writing policies in Philadelphia, the way risk is calculated and communicated is rapidly evolving.
Let’s unpack how.
Why Every Home Is in a Flood Zone
Many homeowners don’t realize this, but every single home in America is technically in a flood zone—the only difference is how high-risk that zone is.
FEMA flood zones like X, A, and AE categorize the level of risk based on likelihood of flooding events.
Homes in high-risk areas (like A or AE zones) typically require flood insurance as a condition of a mortgage.
Lower-risk areas (Zone X) may not require insurance but are still not immune from floods.
Yet this critical information is often misunderstood or completely unknown to consumers.
The Flood Insurance Gap: What Homeowners Get Wrong
One of the biggest misconceptions in property insurance? Confusing flooding with water damage from internal sources, like a burst pipe.
“We hear it all the time—people think a broken pipe is flood damage. It’s not,” said Tim in the Bricks and Risk episode.
Here’s the truth:
Flood damage comes from external water sources (overflowing rivers, hurricanes, storm surges).
Water damage inside the home is typically covered under your standard homeowner’s policy—but flooding is not.
Flood insurance is a separate policy and is often affordable (~$450/year), but most people don’t opt in unless their lender forces them to.
How Many People Actually Opt In Voluntarily?
In areas like Philadelphia, only 20–25% of homeowners choose to add flood insurance when it’s not required. That’s a huge coverage gap—driven largely by misunderstanding or lack of awareness.
Zillow + First Street: Climate Risk Enters the Mainstream
To bridge that gap in risk awareness, Zillow has partnered with First Street Foundation, a nonprofit using cutting-edge climate science to rate the environmental risks of individual properties.
Instead of reinventing the wheel, Zillow tapped into First Street’s existing model to provide climate risk scores directly on listing pages—offering transparency about threats like:
Flooding
Wildfires
Heat stress
Sea level rise
Why This Matters for Buyers and Sellers
For buyers, this is an invaluable resource: you can now gauge long-term environmental risks before placing an offer.
But for sellers? This transparency could cut both ways.
A “bad” climate score may cause buyers to back out—or demand price reductions.
Sellers may question whether Zillow is hurting their property’s value by displaying risk data so prominently.
How AI and Drones Are Scoring Your Roof
And it’s not just climate. Insurance companies are now leveraging satellite imagery, drone footage, and AI modeling to assess roof condition before issuing policies.
“When we input an address, the system scores the roof—probably out of 100. We don’t know the full algorithm, but it's likely pulling from satellite imagery, staining, permits, and more.”
These automated roof scores influence:
Insurance eligibility
Premium pricing
Underwriting decisions
Imagine Zillow incorporating this next: a RoofScore™ next to the Zestimate. Helpful for buyers, but potentially problematic for sellers who just installed a new roof and still receive a mediocre score.
The Impact of Historic Designations on Property Value
Shifting gears from tech to policy: historic designations may protect architectural beauty, but they can also decrease the financial appeal of a property.
In neighborhoods like Roxborough, Philadelphia, homeowners were blindsided when Ridge Avenue became partially protected under a historic preservation mandate. While the city’s goal was noble—preserving culture and character—some homeowners felt it hurt their resale options.
Here’s why:
You can’t tear down and rebuild, even if the lot is more valuable than the house.
Renovation costs skyrocket due to compliance with preservation standards (e.g., wood windows, original materials).
Buyers are often scared off by extra red tape and expense.
The Insurance Industry’s View on Historic Homes
Insurance companies see historic homes as higher-risk and higher-cost.
Every homeowners application includes the question:
“Is this property on a historic registry?”
Why? Because if there’s ever a claim:
Rebuilding costs will be much higher (custom materials, preservation guidelines).
Time to repair or restore will be longer.
Even builder-grade replacements may not be acceptable under preservation law.
As a result, many carriers won’t insure historically designated homes—or will price them significantly higher.
There are also multiple registry levels: local, state, and federal. Each comes with its own implications, but federal designation usually triggers the strictest limitations and insurance red flags.
Why This All Matters to Homeowners and Investors
Whether you're buying, selling, or investing, one thing is clear: risk is now a currency in real estate.
And how that risk is measured, scored, and shared—by platforms like Zillow or carriers using AI—can have real financial consequences.
Smart investors and homeowners need to:
Understand FEMA zones and flood insurance gaps.
Pay attention to environmental risks and their long-term impact on asset value.
Look out for hidden renovation or insurance costs tied to historic homes.
Recognize that transparency (like climate scores) is becoming the industry standard.
FAQ: Flood Zones, Climate Scores, and Historic Properties
What is the difference between flood insurance and water damage coverage?
Flood insurance covers external water intrusion (rising water, flash floods). Water damage from internal issues (burst pipes) is covered by standard homeowners policies.
How much does flood insurance typically cost?
On average, around $400–$500 annually, depending on your home’s location and flood zone rating.
Can I opt into flood insurance even if my mortgage doesn’t require it?
Yes, and it’s highly recommended—especially as weather patterns become less predictable. Only ~25% of people voluntarily do so today.
What is First Street Foundation?
First Street is a nonprofit that provides climate risk scores for U.S. properties using advanced modeling. Zillow now displays these scores on many listings.
Can a climate score lower my home’s value?
Potentially. Buyers may negotiate based on risk exposure, especially for homes in high-flood or wildfire-prone areas.
How do roof scores impact insurance?
Insurers use satellite and AI tools to grade roof condition. A lower score could increase premiums—or lead to denial of coverage.
Why do insurance companies dislike historic homes?
Because repairing or rebuilding a historic property is much more expensive and time-consuming due to preservation laws.
Final Thoughts
As the real estate world evolves, risk transparency is becoming central to property value, buyer perception, and insurance costs. Whether it’s Zillow publishing climate data, insurance carriers scanning your roof from space, or local governments preserving history—every layer of risk now matters.
If you’re in real estate or insurance—or just want to be an informed homeowner—this shift isn’t something to fear. It’s something to prepare for.
Subscribe to the Bricks and Risk podcast for more insider conversations like this one.
🎧 Available on Spotify, Apple Podcasts, and bricksandrisk.com