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FEMA & MA Flood Insuance Redux

By
Real Estate Broker/Owner with RIVER FARM PROPERTIES, LLC BK3341635 - Florida

With homes for sale in Plymouth and on Cape Cod or buyers for whom to find homes, I try to be precise and complete in my work product and knowledgeable of current market changes affecting clients.  It's my job to provide accurate advice.

As most of us now know the Federal Emergency Management Agency, FEMA has been in the process of re-drawing their flood maps which have not been updated for 20 years or more.  As a result the areas affected by flood waters are expanding and thus flood insurance will be required for more homeowners and increased cost for those already affected.  

I  was recently part of a meeting on Cape that was attended by other Realtors and several federal and state employees of FEMA, Conservation and Planning.  Some of these panel members were heavy hitters and included a representative from Washington D.C.  My prior blog outlined the issues and this is an update following this meeting.

After all the presentations and questions it comes down to the following at the present time:

1) The National Flood Insurance Program, NFIP, passed by Congress is the only game in town.  According to  insurance industry leaders there is no market for private companies to write flood insurance. They don't want the risk and/or can't make a profit on what they would need to charge for rates.  If Congess decides to defund this program there is no alternative for many homeowners. In MA there is Mass Fair Plan. 

2) All the new FEMA maps are preliminary and may change until early in 2014.  So even looking at the maps today is no guarantee your property will not be in a flood zone area when finalized.

3) NFIP is not sustainable as it is losing money subsidizing flood damaged areas.  The cost of insuring properties has to be pushed out to those who buy and build on the coast in areas designated as prone to flooding.

4) Flood insurance costs as we know it will be going up yearly until premiums can cover the actual cost of insuring a home in a flood zone area. "Elevation Certificates" may be a seller/buyer requirement to real estate transactions in the future.  Costs for these surveys will likely be $200-$1,000 depending on level of difficulty and time needed to survey. But they will be the definitive method to determine whether or not property is in the flood zone. Once in a flood zone your in it.  Homeowners may be able to modify their homes to lower their costs but they will still be in the flood zone.

5) All agencies, Congress and local towns are trying to find a way to ease into this inevitability and not destroy homwowners or forcing some to default and keep the real estate market recovery intact.

6) There will be several types of policies and some sellers may be able to transfer their current policies to new buyers.  This may be short term as Flood Insurance Rate Maps, FIRM and Elevation Certificates will override grandfathered properties.  Everyone hopes there are sane approaches to this per #5.

No doubt this dialog will continue into 2014.  The best advice is to point buyers and sellers to the appropriate agency and to local insurance agencies who job it is to stay current. 

 

www.RiverFarmProperties.com

 

Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

John, this is the second post I've read on this topic today.  Homeowners are definitely in a difficult position, with one insurance provider.  I'm glad to hear that municipalities are working with Congress to find the best possible financial solution.

Oct 21, 2013 08:43 AM
Anonymous
John Muscarella

Sharon, hopefully this is rolled out in a prudent manner.  There is a real exposure to our industry. 

Oct 21, 2013 10:18 AM
#2
Conrad Allen
Re/Max Professional Associates - Webster, MA
Webster, Ma, Realtor

Hi John.  What do you say to the buyer when they ask what will be the cost of flood insurance?

Oct 21, 2013 08:16 PM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

Great share John and the time roll out keeps changing here...we were suppose to be a go with the new flood maps this month, now told next month.  I have the number of our division FEMA person who has been very helpful to me on my properties.  It is going to make coastal real estate more difficult to sell since the homeowner needs to factor in flood insurance.

Well perhaps that loss will make the buyers more aggressive on the next one...good luck!

Oct 21, 2013 09:31 PM
John F Muscarella
RIVER FARM PROPERTIES, LLC - Venice, FL
Broker/Owner, Venice, FL, Florida's Suncoast

Conrad - the only answer is rates and maps are still in flux and it's best to call your insurance agent. 

Ginny - It is possibly a business changer for those of us who market waterfront properties.  That is why the rollout of this program is critical to get right.  Do we trust governemnt?

Oct 21, 2013 09:56 PM
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello John,

Hmm, call me pessimistic but "sane" approaches by a government agency is not what the public has come to know!

Oct 23, 2013 12:00 AM
Roy Kelley
Retired - Gaithersburg, MD

Home owners and prospective home buyers need to be very much aware of the need for flood insurance and have a budget that will cover the cost. The changes will adversely impact many families that have limited incomes.

Oct 23, 2013 12:44 AM
Anonymous
John Muscarella

Lisa - that is the concern. Thanks for the reply

Roy - There are already homeowners that have walked away from their homes due to flood ins cost vs. the value of their homes.  It's always the little guy that gets hurt the most.

Oct 23, 2013 04:06 AM
#8
Milinda J. McGraw
M.J. & Associates - Hanson, MA

- See more at: http://activerain.com/blogs/maylynda#sthash.Ydi5qoEk.dpuf

Oct 24, 2013 01:38 PM
Milinda J. McGraw
M.J. & Associates - Hanson, MA

In case you want to check a property, here is the link:  http://www.floodsmart.gov/floodsmart/

Oct 24, 2013 01:39 PM
John F Muscarella
RIVER FARM PROPERTIES, LLC - Venice, FL
Broker/Owner, Venice, FL, Florida's Suncoast

Milinda, thank you for the Floodsmart URL.  I forgot to include this in my post.  And yes, you are the 4th agent to tell me a similar story on insurance costs.  I haven't lost a deal yet as all my properties have been outside flood zones as of now.  This has the potential to create another distressed market.

Oct 24, 2013 06:19 PM