Hurricane season has officially begun with experts predicting 10 named tropical storms of which 4 are expected to become hurricanes. In the West, countless homeowners continue to worry about the impact of wildfires on their property while Hawaii’s vicious Kilauea, which has been in an explosive state of eruption since May 3, continues to devour everything in its path on the Big Island.
Preparing for and repairing after a natural disaster is one of the most important and stressful parts of homeownership. Here are five things every homeowner needs to be aware of before a natural disaster strikes and when cleaning up afterwards.
How much home insurance do you need?
Natural disasters can be unpredictable, so having the right amount of homeowners insurance to help rebuild the structure of your home, replace belongings, and defray costs if you’re unable to live in your home is imperative.
Determine how much insurance you need in order to rebuild your home. Standard policies provide coverage for such incidents like fire, lightning, hail and explosions. Those who reside in areas prone to floods and earthquakes must pay for additional coverage to protect against those disasters; standard policies will not protect against them.
If the limit of your insurance policy is based on your mortgage, it may not adequately cover the cost of rebuilding.
To be sure you have the right amount of structural coverage, consider:
- Local construction costs
- The square footage of the structure
- The type of exterior wall
- The style of the house
- The type of roof and materials used
- Other structures on the premises like sheds or garages
- Special and historic features
- Improvements that add value to the home
- Municipality permitting fees for repairing and rebuilding your home
To get a quick estimate of the amount of insurance you’ll need, multiply the total square footage of your house by local, per-square-foot building costs. To find out construction costs in your area, reach out to your local real estate agent, builders association, or insurance agent.
Flood insurance isn’t just for those in High-Risk Flood Zones
Government designated Flood Zones are out of date in many regions. While Flood Insurance is required by homeowners who take out a mortgage from a federally regulated or insured lender in high-risk flood zones, everyone lives in a flood zone. It’s simply a matter of estimated risk based on historical data.
The Federal Emergency Management Agency (FEMA) is suppose to review and update their maps every five years to reflect flood risks, but many of the maps that people use to determine where to build and whether to get flood insurance date back as far as the 1970’s. It’s no wonder that when Hurricane Harvey ripped through Hitchcock, Texas only 1 in 4 homes had flood insurance in a town that saw severe flooding during the storm. FEMA had not updated the local flood maps for the town of 7,300 people since 1983.
More than 20% of flood insurance claims come from moderate-to-low zones. The average flood claim is about $30,000, and while you may qualify for government aid if your area is declared a federal disaster area, that aid will come in the form of a loan that must be repaid.
The cost of repairing damage to a 2,000 square foot home from just 6 inches of floodwater can be staggering. The cost of repairing the floors alone can run up to $15,000.
So, it may be prudent to consider flood insurance for your home even if you aren’t currently located in a designated high-risk area and your lender might not require it.
Delaying cleanup can cost you
If the sting of high-cost repairs not covered by your insurance doesn’t hurt, the code violation citation that your municipality may slap on your home after a natural disaster probably will.
Municipalities don’t waste time in handing out citations to residents after a storm. In Miami-Dade county, just hours after Hurricane Irma past, residents were issued citations for downed fences, electrical hazards, and pool barrier safety notices before power was even restored. The county handed out about 857 such “safety notices” to homeowners suffering damage after Irma.
While the county contends this was an attempt at public outreach to remind residents about safety hazards during the recovery process, many people, especially those who given notices weren’t convinced.
Mayor Carlos Gimenez noted that these notices were not official citations and said that the county was not enforcing code violations for 30 days after the storm.
If you are lucky enough to avoid a code violation fee, there are still other fees a homeowner will need to pay. Mainly, securing the proper permits after a natural disaster is another added burden to survivors.
Many municipalities require costly permits to begin home repairs
Depending on the type of damage your home sustains, your municipality may require specific types of permits to pulled before clean up or rebuilding can begin.
Perhaps in an effort to make up for their failed public safety outreach attempt, the Miami-Dade County Commission approved a rule to waive fence permit fees provided the structures weren’t surrounding pools and homeowners used the same materials, design and layout as their pre-Irma fence. Fence permits start at $130 and increase depending on size of the fence being repaired.
After Louisiana residents suffered widespread historic flooding, the stress of cleanup and rebuilding was compounded by government building permit requirements. In cases where waters reached the level of electrical sockets, owners were required to apply for a full construction permit from their parish government, which was an expensive and unexpected cost for many.
Considering the costs of rebuilding and repairing alone, these additional government fees are a huge burden on homeowners struggling to get back to normal. While some counties and cities may approve rules to waive such fees in response to a natural disaster, this is not always the case or the waivers may come with specific caveats that may affect each homeowner differently.
Of course, it makes perfect sense to have safety standards implemented by governing authorities when building and repairing structures. However, those standards should be balanced with common sense and compassion for residents reeling from a recent disaster.
Homeowners should contact their governing municipality before beginning any repairs to ensure all proper permits are pulled and fees are paid. If not, they may be hit with hefty building code violation fines.
How to avoid foreclosure after a natural disaster
In addition to dealing with homeowners insurance, government code and building departments, costly repairs and loss of income, mortgagors must also worry about staying current on their loan terms with their lenders.
A common fear among housing market experts after a natural disaster is the increase in foreclosures that typically follow. In March 2017, there were 52,100 foreclosure starts, up 11.56% from the month before. Florida and Texas accounted for two-thirds of that increase according to Black Knights’ monthly first look report. This increase was a direct result of the moratorium for borrowers affected by Hurricanes Harvey and Irma.
Fortunately, there are some options for homeowners struggling to make mortgage payments after a disaster.
Applying for forbearance
A forbearance is a period in which mortgage payments are suspended. This is option for most homeowners residing in a declared disaster area and depending on the lender, there are multiple options that may be available to affected homeowners.
After the major flooding in Louisiana, Cathleen Dell and her husband were looking at substantial repair costs. Because their home was not located in a designated flood zone, they didn’t have coverage. They contacted their mortgage company to apply for forbearance in order to use that money for repairs.
Unfortunately, the terms their private mortgage company laid out could have easily made things worse and potentially led to foreclosure. Dell was under the assumption that her payments would be suspended for 90 days and repaid at the end of her loan, but after looking closely at the paperwork, all of the payments would come due at once, including fees at the end of the grace period.
With house payments at about $1,300 a month, there was no way the couple could have afforded a $10,000 payment after paying for repairs.
Some key things to remember when requesting a suspension of your mortgage include:
- Every lender varies in their forbearance options.
- FHA, VA, Freddie Mac and Fannie Mae have specific plans to help mortgagors in designated disaster areas.
- Repayment options can become more of a burden than relief, so read the paperwork carefully before agreeing to new terms.
- Be aware of when the amount will be due in full and if interest will incur on the amounts suspended.
The type of assistance available depends on the type of mortgage you have. A government backed mortgage like an FHA or VA loan protects lenders against losses. For these types of loans, lenders can evaluate your loan for mitigation assistance to avoid foreclosure. Lenders may also execute a loan modification to temporarily suspend mortgage payments up to six months and waive late charges. For conventional loans, mortgagors must reach out to their lenders to see what relief is available.
A homeowner should contact their lender immediately after a natural disaster if they are unable to make payments. Before signing any documents, be sure to fully understand the new terms of your payments.
If homeowners are unsatisfied with the option provided by their lender, they’re encouraged to reach out to HUD’s National Servicing Center. Additionally, homeowners may contact FEMA for financial assistance.
Building code violations may affect your ability to sell later
Finally, any unresolved building issues stemming from a natural disaster could have a huge impact on your ability to sale the property later.
Savvy sellers and buyers know the benefits of conducting a full municipal lien search on a property before closing. This search is important to uncover any open municipal code violations or unpaid permit fees that will not be revealed in the title search. While a homeowner may be able to delay paying the fees temporarily, if the homebuyer should request this search and it shows unpermitted work or unpaid code violations, you will eventually have to correct building issues that were not done with the proper permits or pay the fees before closing.
It would be best to make these corrections following your local governing authority’s code the first time instead of having to deal with the problem months or years later and risk delaying your closing.