Nathan Colmer | Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
Nathan Colmer | Van Dyk Group
C: 609.290.4293 | O: 609.492.1511
Hurricane Sandy made landfall in the Long Beach Island area at the end of October 2012 and caused major damage to the areas of Long Beach Island and elsewhere. While most of the storm damaged inventory has cleared the market, there are still some opportunities to buy a home on Long Beach Island. There is much to understand about mortgages for storm damaged homes in the Long Beach Island real estate market as these loans differ greatly from traditional financing.
Hurricane Sandy, which made landfall on Long Beach Island at the end of October 2012, significantly impacted the Long Beach Island area and the LBI NJ real estate market. Even though the entire area and the local market have both recovered, the impacts of Hurricane Sandy can still be felt and it is therefore important to protect yourself when Shopping For Storm Damaged Homes in the LBI NJ Real Estate Market.
There are three primary areas to consider when searching for a home in the LBI NJ real estate market. They are:
Perhaps the most publicized concern in the wake of Hurricane Sandy is flood insurance. While it is true that in some cases flood insurance will be very expensive, the majority of homes on Long Beach Island are either elevated above the current Base Flood Elevation or will see only a minimal increase to their annual costs. That being said, there are many homes that are below the current elevation levels. These homes are mostly located on the bayside, but it is important to understand flood insurance on Long Beach Island and realize that the costs of insurance can be prohibitive of purchasing a home in some cases.
If a home has been damaged by Hurricane Sandy it is important to remember to add in the cost of the repair to the purchase price of the house…and add 20%! Often times, renovations can far exceed the estimated costs so it is important to add in some money for unexpected items when trying to value the property. It is easy to look at a home that has been damaged and forget that the costs of renovation and possibly elevation will add to the total price. The additional cost could potentially exceed the market value of the house.
Above all else, when Shopping For Storm Damaged Homes in the LBI NJ Real Estate Market it is important to make sure that the costs of the home do not outweigh the market value of the property. A home that is significantly below base flood elevation or a house that requires substantial renovation may in fact not be the best value in the Long Beach Island real estate market. The best values on Long Beach Island will come from a motivated seller. Sometimes that motivation will come from a home having been damaged by Hurricane Sandy and sometimes a better value can be found elsewhere. When Shopping For Storm Damaged Homes in the LBI NJ Real Estate Market it is important to look at all aspects of the property, identify any potential problems and offer a price that protects the investment.
While many of the storm damaged homes have cleared the LBI real estate market, there are still many properties for sale as homeowners finalize their settlements with the insurance companies. This has created some new opportunities and trends in the LBI real estate market that buyers and sellers would be wise to follow. For example:
The simple law of supply and demand dictates that has supply lessens, demand will increase. This is the case with many storm damaged homes on Long Beach Island. Current Trends in the LBI Real Estate Market and Storm Damaged Homes show us that much of the initial inventory has cleared the market and therefore new listings for storm damaged homes are entering the market at a higher price. This is not to infer that these homes are still not “good buys” in the LBI real estate market. Only that the window of opportunity for these storm damaged homes is starting to close and buyers must act quickly when a good deal presents itself.
With the supply of storm damaged homes starting to decrease, new buying opportunities are opening in older, non –damaged homes on Long Beach Island. The traditional Cape Cod style house which was the norm for construction in the 1950’s and 1960’s on LBI saw the most damage from Hurricane Sandy however there were many of these homes that suffered little to no damage from the storm. These homes, especially if they have not been updated, may be the best area to look for value in the LBI real estate market. These homes must compete with comparable sales of storm damaged homes (as it is common for older homes to be sold as knock downs) and therefore must be priced competitively in order to attract the attention of buyers. Many of these older homes are already at or above the new Base Flood Elevation (BFE) as the natural elevation of the ground exceeds FEMA;s requirements.
Currently we have been seeing not only an increase in sales activity but also an increase in the average sales price of single family homes, condominiums and duplexes in the LBI real estate market. Home sales over the summer have been averaging more than a closing per day and the average price of a single family home is higher than 2011 and roughly the same as 2012. There are roughly 50 homes under contract at any given time over the past few months on Long Beach Island so with this kind of buyer activity, it is easy to see why it is important to follow Current Trends in the LBI Real Estate Market and Storm Damaged Homes.
A little known fact is that with conventional financing, banks lend money on the structure: not the land. Therefore, if a property has been damaged by Hurricane Sandy and was gutted, it will no longer qualify for traditional financing. The good news is, there are many loan products and Mortgages for Storm Damaged Homes in the Long Beach Island real estate market available to consumers.
The type of loan a buyer should seek will depend on what the intended use of the property will be. A primary residence will qualify for 203k financing whereas a second home or investment property will be limited to a Homestyle loan.
A 203k Streamline is the simplest form of financing when seeking Mortgages for Storm Damaged Homes in the Long Beach Island Real Estate Market. A 203k Streamline loan will finance 96.5% of the purchase price of the house and also loan up to $35,000 for non-structural improvements. Non-structure improvements means the money can be used for things like electrical work, plumbing, drywall, insulation, floors, kitchen, bathrooms, etc. This is an excellent and helpful form of financing for the purchase of a storm damaged home in the Long Beach Island West real estate market.
If the property was structurally damaged, meaning the foundation needs to be replace, the building needs to be raised or an addition will be put on the house, a full 203k loan is needed. A full 203k involves more work and draw payments similar to a construction loan. A consultant for the bank must evaluate the project and make sure that the finished home will be worth more than the amount the bank is lending. These loans are excellent options for properties that need to be demolished or raised as they offer more money for construction on primary residences.
Homestyle renovation loans are available for primary homes, secondary homes and investment properties in the Long Beach Island real estate market. Homestyle loans will group the purchase price of the land and the estimated cost of renovation and loan 75% of the either project. These loans carry a slightly higher interest rate but can be worth it for a second home as it allows for the purchase and rehab of a storm damaged home or the construction of a new home.