Recently Realtor.com and Zillow have been promoting “risk scores” for properties to reflect environmental risk from fires and floods. These new scores are radically altering real estate prices. What is included in the new scores? Are you impacted? How accurate are these scores? How do you find out your score? Can you correct it?
The new environmental risk scores for properties
A company called First Street has been one the first to try and come up with an environmental “score” for each property. They use various data sets to estimate the risk of a property from 5 key factors:
- Flood Risk
- Fire Risk
- Air Factor (air quality)
- Wind Factor (risk of high/damaging winds)
- Heat Factor ( extreme heat temperatures)
The information from these factors is published on sites like Realtor.com and Zillow (note Zillow recently has been removing the environmental factor information due to an uproar from realtors). Below is a screenshot from the information on Realtor.com for a residential property in Colorado
How accurate are the environmental scores?
I only would really concentrate on three of the factors wind, fire, and flood. I think it is pretty self-explanatory that if you are looking at a property in Phoenix, AZ it is going to be hot. In regard to air quality that is also pretty self-explanatory. If you live in Atlanta, your air quality is likely lower than Key West, FL.
Flood: this is the biggest influence on price as FEMA flood maps are very outdated and have been politicized. Cities have petitioned Fema to remove certain areas from the flood zone in order to enable development. As we can see, time and time again we get multiple floods in areas not in the 100 year flood zone. First Street’s data tries to set the record straight and thousands of more homes are classified as high flood risk even though they have little to no flood risk on Fema. At the high level, the data is likely accurate within lets say a quarter of a mile, but we all know there can be huge variations in neighborhoods. For example a house could be built up 5 feet to eliminate flooding issues and yet this information cannot be captured in this detail with the flood data.
Fire: From my personal experience looking at various properties in Colorado and knowing the high risk areas well, I would take this data with a grain of salt. At the county wide level, the information is likely okay accuracy but at the property level, the information is very suspect. For example, a house could have a golf course across the street which would substantially reduce fire risk as it acts like a huge firebreak. Furthermore, a neighborhood could be fire wise meaning that mitigation efforts were done and yet this is also not factored in. One area could have fire aircraft stationed a mile from the property that could dump water on the fire. Unfortunately, based on what I have seen today, at a very high level you can pick up some trends in the fire data, but without physically visiting a property and intimately knowing the mitigation steps, the information is not useful for a particular property.
Wind: I also wonder a bit on the accuracy of the wind predictions especially in areas like Colorado where terrain radically alters wind speeds. For example, I looked at one property and the wind risk was low/moderate and yet every single year there are gusts well over 100 mph due to its proximity to a very high mountain range. Once again, take the data with a grain of salt.
How are these new scores impacting property values?
Here is one person’s story that was highlighted in a Wall Street Journal article:
“John Simeone was sure his vacation condo, nestled in New Hampshire’s White Mountains, would sell easily. Then the listing went live in August: “It was like a bolt of lightning hit me in the head.”
The three-bedroom townhouse in Lincoln, N.H., was labeled on the home-listing site Zillow as an “extreme” 9 out of 10 flood risk.
Simeone was shocked over his home’s flood rating. John Simeone
Simeone was shocked. The home is around 60 feet above the nearest river, and the flood rating shown on Zillow linked to a report with a different address.
He thinks the rating spooked buyers. Despite a price cut, his $769,000 home remains unsold. “
A very high flood or fire score makes a house less likely to sell, according to a Zillow analysis last year. It can also create a “disaster discount,” with high-scored homes that do sell more likely to go for under the initial list price, the analysis found.
Can you change your environmental score?
From what I have seen so far it is next to impossible to get the score changed even if the score is inaccurate:
Homeowners said their complaints to First Street are stonewalled, with a boilerplate response but no follow-up or resolution.
First Street reviews all homeowner complaints and works to resolve any error, but it is rare for a fix to be required, according to Matthew Eby, founder and chief executive officer.
An accurate, house-level, national flood map “is not only possible, it has been done not just by First Street, but many other firms,” he said. “We stand by our data.”
Lawsuits on environmental scores need watching
Andrew and Eri Uerkwitz sued First Street and Zillow in New York state court, alleging that a “false and misleading” high-risk flood rating caused them to lose money on the sale of their Chappaqua house. The three-bedroom colonial, bought for $1.1 million in 2022, sold for $999,000 last year.
Opposing the lawsuit, First Street and Zillow said the Uerkwitzes are trying to make the climate scores a scapegoat for a real-estate loss. The score is a forecast and “not a statement of verifiable fact” so can’t be the basis for an injurious falsehood claim, Zillow said in a legal filing. The legal battle is ongoing, according to court filings. We will need to stay tuned to see how this all plays out in the courts.
New age of data that can alter property values
We are entering a new age of data that can radically alter property values with basically no recourse for the data providers. Let’s say First Street says your house has a 7 out 10 flood factor. This information will reduce the price of the home substantially as prospective buyers are worried about floods. Unfortunately, even if this information is inaccurate there is really nothing you can do.
A good example is the fire factor; I looked at various properties I’ve owned in Colorado to see how they rated the fire risk. The risk rating was not accurate at all. For example, you could have a rural property with the closest fire station 20 miles away with no fire hydrants or water nearby and extreme wind events versus a house that is 1 mile from the fire station with two fire hydrants nearby the property with a large firebreak (golf course that is watered). Sadly, there is nothing you can do as a homeowner.
I’m all for increased data provides better decision making, but not having recourse to correct bad information along with a flawed methodology on fire ratings is hugely problematic. Sadly, real money is being lost by homeowners regardless of the accuracy of information. Stay tuned to see how this evolves with the upcoming lawsuits.
Additional Reading/Resources
- https://www.wsj.com/real-estate/climate-change-to-wipe-away-1-5-trillion-in-u-s-home-values-study-says-60c6970b?
- https://www.wsj.com/real-estate/home-sales-zillow-first-street-disaster-score-bf91e565?
- https://www.fairviewlending.com/where-should-you-invest-in-real-estate-in-2026/
- https://www.fairviewlending.com/what-happens-to-the-economy-one-year-from-now-is-there-an-upside-surprise/
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