White Oaks Bayou Flooding & Shady Acres – An Example of External Factors Affecting Value

I was recently sent a request to perform an appraisal on a property in the Shady Acres subdivision of Houston. At first glance, the appraisal assignment seemed easy enough, a simple purchase transaction in a well established area of the Heights. A quick search of previous sales in Shady Acres over the past 6 months confirmed that the sales price was reasonable and that everything looked kosher. However, this area of the Houston Heights abuts the White Oak Bayou waterway that runs along T.C. Jester and I knew the area along the Bayou was prone to flooding. With this is mind I decided to do a bit more research on our property. I headed over to the FEMA site to look at the flood maps for this area. Sure enough our property was directly in an “AE”, or 100 year flood plain. I knew that I now must include at least 2 sales that shared this same “negative factor” or else the lender would not accept the appraisal. (It is always considered “good practice” to include sales that have similar factors, this confirms and supports your conclusion on whether the factors affect value or not.)

Here is where things started getting sticky. I performed a search on MLS for homes in Shady Acres that were inside the flood plain like our subject. Over the last seven months there wasn’t ONE sale; this threw up a huge red flag for me. With my curiosity piqued I Googled a few queries and stumbled upon something called the “White Oaks Bayou Flood Control Project” and the City of Houston Ordinance 19-43. In a nutshell, the documents revealed to me that the City of Houston passed an ordinance in early 2007 that heavily limited the future use of all property along the White Oak Bayou due to the flooding. This had in turn SEVERELY affected all property values within this area. I found a story on Chron.com about how one such property went from a value of $131,000 to $9,300 in a matter of a month. You can read the article here.

This was a great, although tragic example of how outside factors can affect value. This was also a prime example of WHY real estate appraisers are needed within the industry. Although both real estate agents involved in the transaction are seasoned professionals, neither were aware of the outside circumstances. After speaking with them and explaining all the details they were both very grateful of my research on the matter. It’s nice to feel like something other than the enemy from time to time =)

What does this mean for values in the White Oak Bayou area? Well, currently there are several proposed amendments for Ordinance 19-43, how long it takes for homeowners and the City of Houston to hash out all the issues is a matter for the courts.

Here are the documents concerning ordinance Ch. 19 Sec 43

The Flood Plain Ordinance

Proposed Changes / Amendments

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