What to do if you flooded during Harvey?

What to do if you flooded during Harvey?

If your home flooded there are many options to consider when deciding on how to proceed.

If you had flood insurance, the most obvious choice would be to repair to previous condition or better using the insurance proceeds.

Another path would be to accept insurance proceeds and sell the home as-is if there is enough equity. Use money that is left from insurance and the sale of the home to move to the next property.

If you did not have flood insurance accept any assistance offered from FEMA. This will likely not be enough to repair the home to its pre-disaster condition. FEMA's goal is to make your home safe and habitable.

Other grants may come available at a later date, but government moves slow, so it could be many months and possibly years before homeowners actually receive any additional grant money, if any.

Consider refinancing using an FHA 203K loan which will allow you to roll repair expenses in.

Loan Programs for Disaster Victims

Whether you flooded or not, several mortgage products are available for owners and renters to help buy another home or repair your current home.

FHA 203H

This program is designed to assist owners or renters whose primary residence is uninhabitable due to the disaster. It provides 100% financing of single family homes or FHA approved condos so there is no down payment required. There will be some expense for closing costs and prepaid items such as insurance policies and to set up the buyer's escrow account for taxes and insurance. The seller is allowed to contribute to these expenses if they are willing and some lenders are waiving some of their fees. Out of pocket should be comparable to, or less than the deposits and 1st month’s rent on a rental property.

The 203H program allows for flexible credit and income requirements, and late payments after the disaster may not affect the borrower's ability to be approved. If the borrower is still obligated to a mortgage on an affected property the payment will not be calculated in the qualifying ratios as long as the borrower can provide evidence that they are working with their mortgage company and their losses were insured.

This product will be available until 9/1/2018. To qualify, the buyer must prove that they were in a disaster area and their residence was damaged to extent that it is uninhabitable.

FHA 203K

In the past this program has been used mostly to purchase properties needing work that prevented the property from being purchased with the standard FHA 203B loan. The 203K loan can also be used to refinance a primary residence the borrower currently owns that needs repairs. The loan amount is based on the value of the home after the repairs are performed. A licensed and bonded contractor must be retained to do the work and they must provide a detailed estimate prior to the appraisal as this is what the appraiser will base his opinion of post-repair value on. Another option is to retain an inspector that is certified by FHA to do these estimates. Contact us if you need a list of qualified inspectors.

The money for repairs is held in an escrow account by the mortgage company and disbursed to the contractor at certain stages of the repair process after an FHA inspector reviews the work to ensure it is up to FHA standards. The contractor has 30 days to begin work with a maximum time frame of 6 months to complete and close out the 203K.

FNMA Homestyle Renovation Mortgage

The Fannie Mae HomeStyle Renovation is a single-close loan that enables borrowers to purchase a home that needs repairs, or refinance the mortgage on their existing home and include the necessary funds for renovation in the loan balance. The loan amount is based on the "as-completed" value of the home not the present value.

Unlike FHA loan products this can be used with investment properties and second homes. The maximum allowable loan-to-value ratios are lower on these types of properties than when using the Renovation Mortgage on a principal residence.

The borrower must have a contract with a contractor to perform the work and the lender must review the contractor to determine if they are qualified. Plans and specifications must be provided and need to be prepared by a licensed general contractor or architect.

Renovation costs are limited to 50% of the "as-completed" value of the home.

SETH 5 Star Freddie Mac Advantage Down Payment Assistance

This program is for primary residences only but unlike the FHA 203H, the buyer does not have to have been on a previous mortgage or lease. Southeast Texas Housing Authority (SETH) provides a grant to cover the 3% down payment and some closing costs. Additional closing costs can be paid by the seller, if they agree. 640 minimum credit scores are required for this program and there are normally income ceilings that cannot be exceeded but until 2/28/2018 the income ceilings are being waived.

This is an overview of these programs and is not intended to be a comprehensive report. If you are interested in finding out which may be best for you and your situation, let us know and we can connect you with one of our preferred lenders. Some of these lenders are temporarily waiving some of their fees in order to help the community.

How will values be affected?

The value of homes flooded during Harvey may take a while to fully recover, but we do not think that we will see a huge long term drop in value for restored homes that did flood, especially if the only time a home has flooded is during Harvey, which was a historic event. In fact after hurricane Ike in 2008 some older neighborhoods benefited because many homes received needed updates.

We have heard from buyers that have expressed concerns that the price of homes that are available will skyrocket. Unlike commodities like fuel, etc. that typically see a spike after major events, home prices are somewhat protected in the sense that the majority of homes sold will have to appraise for the amount of the sales price in order the buyer to be able to obtain financing. Appraisers must use recent comparable sales and follow guidelines that will serve to regulate the speed at which sales prices increase. If you plan on buying a home at some point, waiting will likely cost you more. Home prices have already been increasing the past several years. In fact the median price of a single-family home that sold last year was $221,500, 4.5 percent higher than 2015 and up 43 percent from 2011 according to information from the Houston Association of Realtors.

 I want to sell, should I wait?

If your home flooded and you have insurance to cover it and you are thinking about selling, you may need to wait to get started until find out how much damage the adjuster estimates your home to have. Otherwise, the sooner the better in order to get a jump on the market before too many of these homes are listed. In any case, you don't need to wait to contact us for a no-cost estimate of what it could sell for in its current condition, versus in restored condition.

Investors

Many investors will be out trying to buy flood damaged homes and this could be your best option and we do have investors that are actively buying properties right now. However, keep in mind that investors will be paying less than market value because they will want to make a property after acquisition, rehab, and holding costs as well as expenses to sell the home. Don't agree to sell to an investor before contacting us or your real estate agent to help analyze your options. 

Is it a good time to buy?

While inventory levels will probably tighten up again, with perseverance you can still find some great affordable homes. The availability of several great financing options, reduced fees from lenders and continued low interest combine to make it a great time to buy. You do not have to be a homeowner with a damaged home to take advantage of some of these programs.

We want to help as may homeowners as we can make the best possible decision in how to move forward. If you had damage and regardless whether or not you are a past client or choose not to use our services, we would be pleased to provide information about the value of your home in its current condition versus what we feel the value would be repaired. Just give us a call at 281-479-6683 or send an email to clientcare@freundgroup.com !

I hope this has been valuable information, thanks for watching Real Estate Insights from The Freund Group, Your Friends In Real Estate!