Real Estate Roundtable: Hamptons Homes and the Flood Zone Question

Flooding in Sag Harbor. Photo credit: Bob Edelman

Waterfront homes and nearby access to our many waterways are among the great draws of the East End, but they also present one of the biggest concerns for potential homeowners—flooding. With that in mind, we posed the questions to Hamptons real estate experts…

How do you help a buyer who expresses concern about choosing a home that may be in a flood zone? What do they really need to know?

“Having owned three waterfront homes over the past 20 years, I have experienced first-hand the ongoing changes in FEMA rules, and the rezoning of flood zones in the Hamptons. I advise my buyers to ask questions and educate themselves—has the house ever flooded, what is the current elevation, what is the current flood zone? Then we engage the best professionals in the insurance industry to guide them through the process. As a listing agent, I recommend that my waterfront sellers obtain a recent elevation certificate before listing their home for sale. This is the first step necessary for a buyer to obtain an insurance quote, so why wait until it becomes a stumbling block to the closing process? My experience has taught me that the more people I incorporate into my ‘professional team,’ the better I can serve my clients. I have a list of the best surveyors, home raisers, contractors, engineers, insurance agents and attorneys, to refer to my buyers and sellers. Each situation is unique, but ultimately it’s about having all facts necessary that make ‘dollars and sense’ before signing on the dotted line.”—Terry Thompson, Licensed Real Estate Salesperson, Douglas Elliman

“Buyers in flood zones should know that a new flood insurance law, the Homeowners Flood Insurance Affordability Act of 2014, was enacted on March 21. Further, they should be advised that while flood insurance rates will go up, they will be capped at premium increases of 18% annually. Yet the key fact buyers should be educated about is that this new law prevents the transfer of ownership of property from serving as the trigger for an exponentially higher new premium rate for flood insurance, as was previously the case since July 6, 2012 under the prior law called ‘Biggert-Waters.’ So, while flood insurance rates will increase over time to take account of the true risk of flooding, it will be a measured increase. More so, a choice to buy in the Hamptons should not be made based upon insurance rates at all, but instead because it’s the Hamptons and, as they say, the reason it’s expensive is because it’s worth it. Lastly, buyers should have their policies reviewed and explained to them so that they understand what is covered and what is not. Following Hurricane Sandy,  many homeowners were outraged to learn that their first floor was considered subterranean space that was excluded from their policy. It is imperative that homeowners understand their rights and obligations under their policies so when catastrophe hits, they are ready.”—Andrew Lieb, Esq, MPH, Lieb at Law, P.C.

“Waterfront properties are still in demand. Buyers want to confirm that they can purchase FEMA and excess flood insurance and that these conform to all appropriate regulations.”—Lynn November, Licensed Associate Real Estate Broker, Douglas Elliman

“The premium properties are those that are bordering or near the ocean, bays and ponds. We are surrounded by water and that is our allure and challenge. The Army Corps of Engineers has established flood zones that are particularly vulnerable to storms and resulting water surges. Construction in these zones must comply with a multitude of local, state and federal guidelines. In addition, it is difficult to obtain private insurance coverage for flood damage and when available a premium is charged. The federal government through FEMA does offer flood insurance at a reasonable cost. The standard homeowner’s policy may exclude damage from surface waters and surges. All homeowners in our area should have a conversation with their brokers as to the extent of their coverage and if a FEMA policy is suitable for them.”—Alan Schnurman, Licensed Associate Real Estate Broker, Saunders & Associates

“How I help a buyer choosing a home in a flood zone is to know the designation of the flood zone. For example, an ‘X’ zone designation is the best zone since FEMA considers it to be the most minimal risk zone. I would highly recommend they contact a local insurance agency that deals in flood insurance. This way, the buyer knows all the ramifications.”—John Christopher, Licensed Associate Real Estate Broker, Brown Harris Stevens of the Hamptons, LLC.

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