Over the last couple of weeks, we’ve seen some real problems with the new flood insurance rules.
There are a big number of homes built before 1975 in West Bank neighborhoods. When these houses were built, the flood maps were not in place and elevation surveys were not standard. Insurance agents call these Pre-Firm homes.
With the rule changes, these properties (with the exception of those in an X or B zone) are becoming harder to sell as insurers require elevation certificates, actuarial rates are being used to set premiums and assuming the existing policies is no longer an option for buyers.
Let’s look at a sample New Orleans West Bank home:
- Built in 1973 (pre-firm)
- In an AE flood zone
- No elevation certificate on file
- Existing flood policy cannot be assumed by buyer
The new rules require that an elevation certificate be obtained (at a cost of $275-$400). Most buyers are not going to absorb this cost, so home owners are finding themselves in the position of coming out of pocket for the certificate in hopes of keeping a sale on track.
Once the certificate is received, the premiums are set based on the elevation of the home compared to the Base Flood Elevation (BFE). If the property sits at or above BFE, premiums are still pretty affordable, although higher than what current owners are paying.
It’s when the property sits below BFE that problems arise.
Depending on the location, we’ve seen annual flood premium quotes of $3,000 and up on homes that are priced below $100,000. For a first time buyer, especially one in an affordable neighborhood, this is the kiss of death for that purchase. Even if the seller is willing to help pay for the first year of premiums, the high annual cost has to be included in the estimate of the buyer’s monthly mortgage payments and it’s pricing some buyers not out of the market, but out of homes in any of the A flood zones.
What can home owners do?
You can’t change the date your home was built, the zone that it’s in or if it’s below the BFE. You can be informed about what could end up putting downward pressure on home prices in neighborhoods that are below the base flood elevation. The harder it becomes to sell in some areas, the lower property values will go.
It’s a good idea to go ahead and talk to both your insurance and real estate agents now about what could happen if you decide to sell anytime in the near future.
Need advice about selling your West Bank home? Call us at (504) 327-5303.