Legal Question in Real Estate Law in California

A lender is allowed to impose conditions on the granting of a loan. If you don't want flood insurance, find another lender.

The first part of Mr. Spirtos' answer is correct. Unfortunately the second advice part is wrong because you won't find such a lender. Lenders are required by banking regulations, and Fannie Mae if you have a Fannie Mae loan, to require flood insurance if your property is in a designated flood area. It should have been disclosed to you as part of the mandatory disclosures that the property was in a designated potential flood plain. If it was not, you can almost certainly back out of the deal, or you can go through with it and sue for the difference in the value of the house without being in a flood plain and it's actual value in a flood plain. If it was in the disclosures you should have known or been advised by your agent that it would mean you have to have flood insurance. If you were not advised on that you have a lousy agent and should complain to their supervising broker. You may have a right to assert a malpractice claim against them as well. Unfortunately your legal remedies are likely to cost you more to sue over than you would get. But they can be leverage points depending on who did what wrong for negotiating either a credit from the seller or some compensation from your agent if they didn't do their job. The bottom line on the insurance, though, is that if you go through with the sale you will have to have the insurance.

I agree with Mr McCormick. I supect that, if you read through all the pile of paper provided in the purchase, you will find information on these loan requirements in the disclosures. You either move forward, or review your documents carefully as to whether you can still withdraw because yoru fail to get the financing.