Tenet 4 Due Diligence is Pricing Risk Due
- Slides: 11
Tenet 4. Due Diligence is Pricing Risk
“Due Diligence” is the responsibility of parties involved in a property transaction to carefully investigate all material risks. Including Flood Risk! Buyers, Renters, and Builders Brokers, Managers, Consultants, Investors, & Lenders Government officials have a fiduciary duty to encourage transaction Due Diligence and to do what they can to improve the Standard of Practice
Due Diligence = Risk Wisdom = $
Pricing Wind/Fire/Environmental Risk is SOP �Routine for property valuations & transactions �Especially Investment & Commercial Banks �Defer to Insurance Quotes � Based on Actuarial Costs � Based on policy coverages/terms �Government Facilitates by � Regulating private insurance market � Regulating bank loan risk � Writing building regulations/codes � Controlling adverse impact � Investing in public sensible mitigation
Thus, Due Diligence says: “Price Location-Specific Flood Risk for Every Property!” Presentations on Tenets 1, 2, and 3 showed us why and how This is 21 st Century Wisdom
Pricing Flood Risk has been Around
Pricing Flood Risk not Due Diligence SOP. . . Until Recently Past: Numerous technical/cost obstacles to full spectrum flood hazard curves everywhere 1968: Congress created “stop gap” binary approach For 50 Yrs: NFIP approach became SOP Entrenched even though not wise But Now: Technology enables pricing flood risk for every property National Flood Insurance Program (NFIP) Flood Insurance Rate Maps (FIRMs)
NOW: Pricing Flood Risk Expertise/Adoption � Specialty consultants. � Businesses optimizing investment & ROI decisions. � Private Flood Insurance
Climate Change Accelerating SOP Revolution Wide Range of Financing Needs � � Corporate bonds County & municipal bonds Commercial loans “Mansion” loans Wide Range of Players � � Securitizers/Investors Ratings agencies Loan resale brokers, advisors Wall Street Soon every loan originator—& real estate broker—in the country will be expected to Price Flood Risk
Tenet 4. Due Diligence is Pricing Risk
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