How Does Flooding Affect Property Values?

 

Louisiana is known for flooding.  From Hurricane Katrina, which was one of the most destructive flooding events to ever hit the United States, to simply a flash flood that takes place in New Orleans, when the pumps don’t work properly, Louisiana residents are used to dealing with flooding events.

How Flooding Affects Property Values

One of the largest fiscal impacts of an area flooding is what happens to the real estate.  There are many things that can affect if the value of your home goes up, stays stagnant or goes down.  A particular area flooding doesn’t always have the same effect on property values.  For instance, after Hurricane Katrina, we saw real estate investors flock into Southern Louisiana to buy up “flooded and gutted” homes.  Many of these homeowners were still able to receive their insurance money – and in addition sold their demolished home to an investor.

eden isles in slidell flooding during Katrina

Flooding in the Eden Isles area of Slidell during Hurricane Katrina

Those investors put thousands of dollars into rebuilding the homes, to resell them.  We saw tremendous increases in property values in areas such as Lakeview in New Orleans and Eden Isles in Slidell.  Both of these areas had stagnated in property values until all of the homes in the area flooded and were rebuilt.

Almost 100% of the homes in Eden Isles and the homes in Lakeview were rebuilt to much higher standards than they previously were built to.  Currently, Lakeview is one of the hottest real estate markets in the Greater New Orleans area.  Where the homes in both of those areas were once average – they are now on the upper scale of the area.

Speaking to a Local Real Estate Broker

We spoke to Shelly Vallee, a real estate agent on the Northshore of New Orleans.  Shelly is the broker for All Around Realty and they have been selling homes in Madisonville, Mandeville, Covington, Ponchatoula as well as New Orleans proper since before Hurricane Katrina.  Shelly has seen the property values of the area that she works in bounce all around after a major flooding event.  She was quoted as saying.

 

Once homes are rebuilt after a major flood, the long term effect of the property values in that area is generally a positive one.  Since the homes get rebuilt to new standards with granite countertops and updated features and appliances, its justifiable that they are worth more.  The exception to that rule is when an area floods multiple times or is built below the FEMA BFE (base flood elevation).  In those cases, the flood insurance may become prohibitive to purchase in that area.  What we see when that is the case is that the price of the home must come down for the homeowner to be able to afford the flood insurance.

 

Long Term Values of Homes After a Flood

Notwithstanding the above mentioned situations where homes or subdivisions have been flooded multiple times or where the home was built below FEMA’s guidelines, homes generally appreciate in value after a major flooding event.  Needless to say, having your home flood is never a fun experience and the fact that you lose everything is a traumatic thing to go through.

The good news is that in many instances, if you can make it through, your home may be worth more than it was before.  Needless to say this takes some time, since in some instances, the homes must be sold and rebuilt prior to the values to start increasing.  Nothing happens ever fast in the real estate industry, but the long term effect of a major flooding event has proven to be an increase in property values.

 

 

 

 

 

 

 

What You NEED To Know About Flood Insurance

Everything That You Need to Know about Flood Insurance

While most homeowners have home insurance, there is one protection that they fail to take into account – flood insurance. Homeowners insurance does not clover flooding, and as we have seen in recent years, even areas that didn’t get flooded in the past are now experiencing floods every year. Damage from flooding in Louisiana can be very expensive – just as expensive as fire damage, and because it isn’t covered under homeowners insurance the only way you can protect yourself against it is to buy flood insurance.  The kicker is that flood insurance can be very cost effective.

Understanding Flood Insurance

Like with any other kind of insurance, you need to know the basics before you commit to a policy. The first thing you ought to know is that flood insurance is heavily subsidized by the US federal government through the NFIP which means that it is affordable. The insurance itself is priced according to zones. If, for example, you are in a C or X flood zone your insurance premiums will be cheaper than in you are in other zones. Here are other tips you should take into account before you buy flood insurance:

•    Flood insurance is sold in two separate policies, one which covers the contents of the home and another which covers the structure itself. The government can only reimburse you up to $250,000 for contents, but you can insure for up to $100,000. In most places after you buy a policy it takes 30 days for it to come into effect. People who live in areas at risk of flooding are required by the government to buy a policy.

•    Decide whether it is necessary to buy private coverage. Because the government provides relatively cheap flood insurance if you are not in an area that is not prone to flooding you may decide to choose this option, but keep in mind that the reimbursement is limited. This means that is there is damage above what the government will reimburse you will have to pay for it out of pocket. You can, however, invest in a private policy that provides more comprehensive coverage – in the event of flooding you will be fully reimbursed.

•    Find out of the NFP can give you a preferred rate. The average annual rate is $650 a year, but there are many factors that can bring this down – the elevation of the location of your property, the risk of flooding, other insurance that you have, what items are covered and how much you are willing to pay for deductibles. The best thing to do is talk to an insurance agent about whether there are factors that can bring down your premiums.

•    Know what is covered. Just because you buy flood insurance doesn’t mean that everything in your hone is covered in the event of flooding. Your garage, for example, is covered only up to 10%, but your heating, plumbing, electronics, carpeting blinds are all covered under structure flood insurance.

Contents flood insurance covers clothing, furniture and your electronic equipment but valuable items are covered only to a certain limit. Your policy will not cover mold or mildew that you could have prevented or sewer and drain backup. It will also not cover patios, decks and swimming pools. The NFP and most private flood insurance policies also don’t cover basements, the place at most risk of flooding. Before you buy a policy make sure that you are clear as to what it covers.

Flood Insurance Basics

What should you do in case you get flooded?

If you already have flood insurance and you get flooded you should file a claim. Make sure that you have your policy’s details at hand at all times so that you don’t waste any time filing a claim – the longer you take the harder it will be for the insurance company to pay.

Start by documenting as well as possible all the damaged items. Take photos of everything that is soaked so that you can show proof to the insurance company. Next, make a list of all these items, including when they were bough and how much they cost. If you get receipts attach them to this list. Next, call your insurance company to file your claim. They will give you an appointment when you can hand them all the information that you have gathered.

Keep in mind that the insurance company will not pay for mold that you could have prevented, so make sure that you dry out your home as thoroughly as possible. Don’t try to do it yourself – if you do it wrong mold will develop. Call in a water damage repair company as they have the experience and equipment to completely dry out your home. Whatever they charge you will be compensated through your claim. If the walls are damaged from the flooding, as they often are, take photographs for your insurance company. Have your furnace checked for damage too – your policy covers it.

One frequently asked question is how to choose a flood insurance company – there are many, and if you are not careful you may end up choosing the wrong one. The best insurance companies are not about sales pitches – if you meet an agent who is pushing you to buy a policy it is best to walk away. You should be looking for a company that is all about providing information.

Do not buy flood insurance online because you don’t really know whether the company exists or not. Before you buy a policy make sure to visit their offices and asses what kind of set up they have. Find out how much litigation they have been involved in – bad insurance companies have a lot of lawsuits brought against them for unpaid claims. This information is free in the courts, but you can also find it online.

Buying a Home: Needs vs Wants

Wants vs. Needs: Making a Home Buying Checklist

The home buying process is a long, and sometimes difficult one. But there can be a lot of excitement around the prospect of a new home. Whether this is the first home, or the tenth, you are bound to have ideas about what you like and don’t like, and what you need and require, and what you want.

Before you start viewing home, even online, you need to make a list of all of your needs and wants. There are tons of real estate statistics out there to assist you in figuring out what is important.  What you come up with is also good information  to share with your real estate agent, so that he or she can eliminate much from the list of viewings, and only show you houses you are truly interested in. This list is going to evolve as you move through each house, but you can start off with the basics.

So first thing first—where do you want to live? Maybe you just got a new job in a certain area and only are willing to commute 20 miles at most to work. Maybe you have a work from home job and can live anywhere you want.

What is your budget?

You’ve been pre-approved for a certain amount, but what are you actually comfortable with spending? Unlike what you see on TV shows, your real estate agent won’t show you anything above a price range you give them.

How many bedrooms and bathrooms do you need?

If you have two kids, maybe you need a 3 bedroom, 2 bathroom home. Now what about how many you want? Maybe you want a 4 bedroom, 3 bathroom home so that one bedroom can be guest quarters or be converted into an office space. Maybe your in-laws are going to living with you and you need a guest house out back.

How much land are you looking for?

buying a home You may want a condo with no yard work or landscaping, or maybe you want to start a mini homestead where you’ll need several acres. Maybe you are taking online classes from home and need an office.  Do you have a hobby that requires space—scrapbooking, woodworking, car restoration. Maybe you need a garage or workshop.
Do you want to be in a good school district, close to restaurants and shopping, near to the lake or boat club, on a quiet street, or close to family? These are all important questions to ask yourself when creating your list.
It’s important to remember that a house can be changes much easier than it can be moved—you may find your dream home in a terrible location but find a fixer upper in the perfect location. In the long run, it’s easier to make the fixer upper have all your ‘needs’ and ‘wants’ than it would be to relocate your dream home.
As for everything else, you have to remember what you consider to be a need versus what you want to have. And maybe even be open to letting go of certain wants in favor of everything that you need.