Recent flood insurance changes affect homeowners and buyers and sellers. Changes went into effect October 1st and already we are seeing some fallout. Please read this article carefully. You may be affected, and we have some advice on how to lessen the pain of these changes, especially if you are in a transaction or contemplating one.
Do Not Cancel Your Policy if it Goes Up
Whatever you do, do not cancel your policy because your insurance is going up. Most will not see their rate increase until their renewal comes due. If you live in an x zone where insurance is not required, do not cancel either.
Buyers can assume your policy. Insurance agents have told me some policies have gone from about $1,600 to over $8,000. The good news is for existing policies, rates can only increase 18% per year, and the buyer can assume. If you cancel, buyer has to get a new policy, and this may make your home less desirable financially in a buyer’s eyes.
Elevation certificates are pretty much out the window. If you have one, save it because it could possibly save you a little. The difference is the National Flood Insurance Program has gone to satellite topography for risk ratings, much like the private insurance has. They no longer use the elevation certificate to determine risk.
Gone are the days when everyone on the block pays about the same rate. Newer homes that are built up higher will most likely pay less than the house next door that sits lower.
Your Sale Could be at Risk
Current transactions could be at risk. Let’s say a buyer qualifies for a home at the top end at $500,000. This includes interest, taxes, insurance, HOA fees, etc. If the buyer qualified at their top end at $500k with flood insurance quoted last month at $1,000 and today the new quote is $4,000, the buyer may no longer qualify.
The good news is we work with insurance agents that have access to private flood companies in addition to NFIP. Some agents don’t like to sell private insurance because they make less money than the national program, so we seek out insurance agents that will. This service is valuable to our customers.
Even if a buyer assumes a policy and saves money today, eventually that property will see increases over time to adjust for the risk. We can delay the rise, but over time it will occur. At 18%, policies will double in price every 4 years until they reach their cap.
Insurance Figures Into Total Cost of Ownership
Much like buyers look at annual costs to join a golf course, buyers will now look at flood and homeowners’ insurance when determining total cost of ownership. If the buyer is considering 4 homes and one of those homes is significantly less to insure, that may sway the buyer’s decision. These costs are not a one-time event, they will go on forever.
When the Ellis Team is working with a buyer, we will call an insurance agent to get quotes on each home. This will be critical to make sure the buyer qualifies for the loan. If the buyer is paying cash, they still want to know what the property will cost them to insure.
Homeowner’s insurance companies have tightened up on what they will insure and what the rates will be. The main components insurance companies are looking at right now is age of roof, plumbing, electrical wiring and panels, water heater, and HVAC system. If your home has a shingle roof over 10 years old, be prepared for rate adjustments or cancellations. Your insurance agent may have other carriers that will insure shingle roof up to 15-20 years, but the rates may be higher. We are seeing homeowners receive cancellation letters.
It Pays to Work wit a Professional
Buying and selling a home is a complex process. It pays to work with professionals who know what they are doing. Hiring a friendly Realtor you met at the ballgame might not be your best choice.
If you are a potential seller, call Brett or Sande Ellis at 239-310-6500 We can guide you to your best decision. Our buyer hotline is 239-489-4042 Or visit www.SWFLhomevalues.com to get your home’s value instantly.
Good luck and be sure to or check with your insurance agent or call us for updates on what is happening. We can recommend a good insurance agent if you need one.