Open House at 51 Old Purchase, Edgartown on April 26, 2014

We will be hosting an Open House to the public on Saturday, April 26, 2014 from 11:00 - 2:00.  This 3 bedroom, 2 bath home has been carefully maintained and is located in a convenient and popular area.  Come by or call 508-939-0206 to arrange a private viewing.

Flood Insurance and Its Impact on Property Values

The Biggert-Waters Act that, when implemented, will redraw the flood plain maps nation-wide and allow insurers to recoup losses suffered from major storms such as Hurricane Sandy, has been modified.  President Obama has signed the HFIA A14 (Homeowner Flood Insurance Affordability Act, Article 14), which puts off some of the major impactful aspects for 4 years, requires a reexamination of the flood maps and contains the following highlights:

1. The sale of a property is not a trigger.
2. Annual premium increases will be limited to a minimum 5% increase and a maximum 18% increase on renewals.
3. Establishes a surcharge for existing policies.
4.  Maintains the Grandfathering rules currently in effect.
5.  Maintains the 25% premium increases for non-primary, business properties and severe repetitive loss properties.

What does this mean for you if you have a property in a flood zone?  Increased premiums.  Maybe not substantially, at first, but there is one other consideration that will realize a major impact - property value. 

Property value is comprised of a number of aspects - you’ve heard the term “location, location, location”.  But other factors such as condition also impact value.  In the past, having a beachfront property meant a higher price tag and you (the Buyer) expected to have higher expenses, such as real estate taxes, etc.  Enter the new flood insurance.  If your annual premium, in just the first year, is $50,000 for $250,000 of insurance (the maximum amount you can procure from the government - the rest must be purchased from private insurers), will this impact your decision to buy?  Will it impact how much you are willing to pay for this property?  Yes. 

If over the course of your ownership the premium cost to you will increase between 5 - 25% per year, this impacts the value of the house and what anyone would be willing to pay for it.  If its not your primary residence, its 25% increase every year!  And, remember, insurance policies are based on replacement cost - not what you paid - not what the assessors think its worth, but what it will cost to replace the structure. 

Here on Martha’s Vineyard, the cost per foot for new construction can vary widely, so your premium will also vary depending on that factor alone.  If you pay cash for your home, or have no mortgage, you do not have to purchase flood insurance.  Just remember that FEMA is not going to bail you out (literally) should a major event occur. 

Expect to see waterfront/flood zone properties decrease in value.  The municipalities where these properties stand will see their tax revenues decline as property owners file for abatements based on their inability to sell or because they purchased a property at a price far below the assessed value.  Almost a tsunami.