Hurricane season officially kicks off this Sunday and although Savannah hasn’t seen much action in that arena in the last few years, the low-lying Coastal Empire still has plenty of reasons to worry about flooding, especially in light of recent changes to flood insurance.
On Thursday, about 50 local Realtors got a crash course on its fundamentals during a seminar at the Savannah Board of Realtors. The seminar featured veteran Realtor Ben Farmer, local insurance agent Jeffrey Brady and the city’s flood plain administrator, Tom McDonald.
“Don’t ever tell somebody that they’re not in a flood zone,” said Brady. “Every property in our area is in a flood zone of some sort.”
Flood insurance is an especially hot-button issue of late thanks to a congressional overhaul passed and signed into law in 2012 called the Biggert-Waters Flood Insurance Reform Act, a piece of legislation designed to address long-term problems with the National Flood Insurance Program, or NFIP.
The NFIP, administered by FEMA, was created in 1968 to limit the damage and financial impact of floods and offset taxpayer funded disaster relief. This federally backed flood insurance was available to communities involved in flood management plans. The city of Savannah and unincorporated Chatham County are participants.
The National Association of Realtors initially supported the 2012 overhaul to try to find stability for the program, which was beleaguered by multiple extensions, amendments and a $25 billion deficit, the result of several crippling hurricanes over the last decade.
In the bill’s final form, though, it subjected homeowners, especially those in coastal areas, to significant increases in their premiums and eliminated some subsidies.
Under the bill, the maximum rate increase the NFIP could impose in a given year was raised from 10 percent to 20 percent and, for non-primary residences built before the 1970s, as much as 25 percent.
A quick-fix in March, a 48-month extension on current rates, kept premiums at bay — for now — but Farmer told the Realtors the onus was on them to make sure they protect their clients and themselves in advance of more adjustments.
“This is a changing situation; it’s very fluid,” said Farmer.
Just because flood insurance may not be required for a mortgage, Brady said, it’s still a good idea to make buyers and sellers aware of the resources available to them. Nearly 40 percent of all flood claims, he said, happen in an X zone, where insurance isn’t required and the average claim is $65,000.
A person in an X zone can get a premium for about $414 a year, including $250,000 in building coverage and $100,000 in contents.
And it’s not just the premium rates Realtors and homeowners have to be concerned about, there are map changes coming that could impact the designation of properties.
In July, McDonald said, map changes will be made to the western portions around Pooler and Bloomingdale, and FEMA is in the middle of a much larger coastal surge study that will result in a revised map from Hilton Head to below the Florida line sometime in late 2015 or early 2016.
Farmer said it’s not a bad idea to encourage clients to seek a certificate of elevation, a FEMA form that determines the proper insurance premium rate for a property. He said some of his clients who have sought certificates have found their structure exceeded federal minimums resulting in significant premium reductions.
Brady said it’s important to check with the local flood plain administrator and find as much information on that home’s history as possible. Even for two houses constructed next to each other and built completely different, he said, the rate could be significantly different based on the zone, the style of construction and amount of coverage that’s necessary.
“Flood insurance has to be a priority,” said Brady. “If you’ve got a house that cost $180,000 and they’ve got to spend $1,200 on insurance versus a $180,000 house that’s not required to carry insurance, what’s the impact on that person’s payment? Significant.”
Farmer said Realtors must think about rate increases in terms of loss of purchase power.
“Someone could close on a house in the next six weeks and get a surprise next year, positively or negatively,” said Farmer.
The bottom line, Brady said, is to stay on top of the changes and to encourage buyers and sellers to be prudent.
“Protect yourself, protect your client,” said Brady.