New FEMA flood insurance regs affecting real estate transactions

Hikes in Federal Emergency Management Agency flood insurance rates are affecting the real estate market in Hoquiam and Aberdeen, several participants and homeowners say.

Particularly hard hit are people who live in or own property in low-lying areas because of new FEMA maps for this region and national flood insurance reform passed in 2012.

The flood insurance program was created to help protect property owners from risk due to flooding and was amended to bring rates more in line with actuarial risk and make the program solvent.

Because insurance premium increases are proving higher than expected, the Senate voted late last week to reform the reforms, which could lead to a delay in implementation. Action is still pending in the House, where the leadership’s enthusiasm for amending the reform is tepid.

“The government has got to do something to change this, this will make real estate for lower income people unaffordable here,” designated broker for Premier Realty, Harley Greninger, said Monday.

“Dealing with FEMA is a joke, we are just totally screwed,” said property seller Nancy Webb, who wants to sell her family property at 705 Lincoln St. in Hoquiam to a buyer across the street.

The home was bought outright by her grandparents in 1905 and was grandfathered in terms of flood insurance rates and Webb didn’t pay much, she said.

But now that she’s selling it, new owners won’t receive the lower rates and that is making the sale more difficult.

The reforms are aimed at eliminating discounts on such grandfathered properties. Per regulations, she had to pay for an elevation certificate to determine the elevation of her property. Currently, FEMA uses 10 feet as a baseline for flooding at her house, Webb said. The elevation certificate listed Webb’s home as both at and below the 10 feet. As an older building, it is uneven, she said.

The cost of elevation certificates is running from $500 to $1,000 on the Harbor.

Gary Murrell and his husband Michael Gyde wanted to buy the home as a rental or a small bed and breakfast. When they discovered their flood insurance for the business could run as much as $9,000 annually, they decided to hold off. Some of that increase is because the property would be used as a business.

“Where is our congressman, Derek Kilmer?” asked Murrell. Kilmer is a co-sponsor of the House equivalent bill to amend or delay current changes to the FEMA laws.

Bill Bonney, a broker with Windermere Real Estate, who has dealings all over Grays Harbor County, worries the proposed legislation, called the Homeowner Flood Insurance Affordability Act, will just kick the can down the road.

The legislation proposes to delay implementation of rates for four years, prevent automatic increases when a property sells, reimburse homeowners who are successful in appealing levels on flood maps and would create a consumer advocate for those with concerns about the maps and insurance.

Bonney did an informal survey for Hoquiam and believes that no sales have closed recently in the flood plain area that are financed. If any have closed, Bonney believes they are cash transactions, which can circumvent requirements for flood insurance. “This has the potential to be devastating to the real estate market here,” he said.

He, like insurance carriers and bankers interviewed, say that property owners may want to look into “difference of condition” policies that cover earthquake and landslide damages as well as flood damage. Much of that market is underwritten by Lloyd’s of London.

Asked if and how local flood insurance premiums differ from rates on the East and Gulf Coasts, FEMA spokeswoman Erin Ward responded in email. National Flood Insurance Program rates are national, or not specific to a region and rating factors also depend on where the structure is in relation to a base flood level, Ward said. “The flood maps drawn for Grays Harbor derive where water will go as determined by a statistical probability that is derived from local data,” she said. Specific questions should be addressed to an insurance agent, she said.

The public can bring questions about their properties to the FEMA public meeting tonight. FEMA’s new local maps will be released to the public for the first time at the meeting and should be on the FEMA website the next day, Ward said late Monday. Preliminary maps are now linked on the front page of Grays Harbor County’s website.

Nancy Wood, a mortgage closer for Timberland Bank, said she worries for her nephew, Nathan Pavola, who bought his first home at the base of Scammel Hill back in December of 2012. His flood insurance increased from just under $117 per month to $583 per month. Wood said she urged Pavola to attend the public meeting at the Aberdeen Rotary Log Pavilion tonight from 6 to 8 p.m. His only option currently is to pay for an elevation certificate, which may or may not lower his rate.

“I hope somebody speaks on our behalf and helps with this because this could be very devastating for Grays Harbor,” Wood said.


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