Crucial Information regarding changes IN FORCE for the National Flood Insurance Program

For the last several years the National Flood Insurance Program (NFIP) has experienced periods of expiration and availability of issuance policies. Each time Congress would pass a temporary bill extending the program for another short period. Finally a bill was introduced that would extend the program for 5 years and not have these continued interruptions. What we didn’t know existed in the several thousand pages of The Biggert-Water Act of 2012 were the changes in premiums and coverage that I will highlight below.

• First, these changes are not being imposed by FEMA or by the NFIP. These are legislative changes from Congress that can be undone by Congress with the right voices being heard.

• Starting January 1, 2013, any non-primary resident home that was built before flood maps were instituted (this is called Pre-FIRM) will see an increase in their premiums as the “discounts/subsidies” are removed.

• Starting August 1, 2013 commercial properties will have their subsidies/discounts removed and the new premium in place 25% per year for 4 years. For example, if the NEW, non-discounted premium is $5,000 per year and the old premium was $500 per year, the difference is $4500. The increase of the $4500 will apply 25% at a time over the next 4 years until the full premium of $5,000 is paid.

• Starting August 1, 2013, subsidies will be similarly phased out at 25 percent a year for severe repetitive (more than 4 claims) loss properties consisting of 1-4 residences, and properties that have incurred flood-related damages where claims payments exceed the fair market value. FYI - Severe Repetitive Loss means four or more claims payments of over $5,000 or two claims that exceed the value of the property.

• New policies written on pre-FIRM buildings (primary or non-primary residence) due to a sale or deliberate lapse will be issued at full-risk rates. THERE IS NO MORE GRANDFATHERING! Prior to the bill being passed, the flood map zone in effect at the time of construction remained with the house when it was sold.

• Beginning in 2014, premium rates for other properties, including non-subsidized properties – such as PRIMARY RESIDENCES AND SECOND HOMES BUILT AFTER 1974 - will increase as new or revised flood maps become effective. We are expecting new flood maps the latter part of 2014. This is not far off folks!

• Full risk rates will be phased in at 20% a year for five years for these properties. While FEMA works through the grandfathering issue on primary residences, they have removed the 2-year policy limit for the Preferred Risk Policy Extension until the new rates are implemented.

• When new flood maps become effective, they will include a rating for a new zone – a Coastal A Zone. This zone will affect areas behind the V-zone and other areas that experience a limit of wave action from 3 ft. to 1 ½ ft. For insurance purposes, a policyholder pays to the zone that touches his structure.

• Increases the limit for annual rate increases within any risk classification of structures from 10 percent to 20 percent. This means they can now raise your premium by 20% a year, anytime they deem necessary.

• Minimum annual deductibles on claims are changed to $1500 for coverage up to $100,000 and $2000 for coverage over $100,000 for pre-FIRM properties, and $1,000 and $1,250 for below and above $100,000 coverage for post-FIRM properties.

• Requires FEMA to notify property owners when their properties are included in, or are removed from, an area covered my mandatory insurance purchase requirements. Also requires notification of Senators and House Members whose States or Districts are affected by map changes.

• The Biggert-Waters Act of 2012 was included in H.R. 4348 – Surface Transportation Act found at http://www.gpo.gov/fdsys/pkg/BILLS-112hr4348enr/pdf/BILLS-112hr4348enr.pdf starting on page 512.

• You can help a Non-Profit coalition spearheading a movement on revising this bill by taking a quick survey about your current insurance http://www.uphelp.org/home-insurance-cost-and-quality-survey
 Your help is greatly appreciated!

These changes, if left in place, will have an impact on the local value of your property during a re-sale on the Outer Banks. Please contact me with any questions you have regarding this. You can also contact your insurance agent to find out exactly what changes you can expect to your specific premiums. If you need information for another insurance agent, I’ll be happy to share the name of a trusted professional I work with regularly.

Will my closing take place on time?

You’re psyched to either buy or sell a home and you enter into a contract to purchase.  You get through the negotiation and settle on the details.  Finally it’s time to move forward with all the steps to closing.  The closing date is defined in the purchase contract.  You’re excited, you make plans for that date.  Then you look at your agent and say…will my closing take place on time?  (Don, don, don)  The short answer is…Probably not.

What?  What do you mean probably not?? Well, the truth is the ENTIRE process of purchasing a home is so much different today than it was just a short 5 years ago.  The most dramatic change is of course with the lending process.  However, even cash sales are having trouble closing on time lately.


When I started in real estate in late 1996, the purchase contract was legal size paper front and back.  Yep, just 2 measly little pages.  Today the purchase contract is 10 pages long!  That doesn’t even include any addenda or the required Residential Property Disclosure.  It’s a litigious society out there and the basic contracts are the proof!

While the current North Carolina Offer to Purchase and Contract does have a spot for a specific closing date, there is also a provision that extends that date by 14 days provided that all parties are moving forward with their best efforts and the delay is being caused by no fault of their own.  Frankly, most delays truly are no fault of the parties, but rather the outside vendors…namely the lender.

For the first time in 18 months, I had a transaction actually close on time last week.  It was a cash transaction and there were 50 days to make it happen. Keep in mind, most offers are written with a 30 to 45 day due diligence period and then another 10 to 15 days to closing.  That’s a 60 day time frame to get it all done and even still most contracts are exercising the 14 day auto extension to make things happen.

Below is a list of the most common issues that come up causing potential delays in closing.

• Negotiation of the home inspection items takes longer than usual.  Most buyers won’t move forward on any other diligence (appraisal, survey, etc) until this part of the process is complete to save the unnecessary expense if an agreement can’t be made.
• 7 days before closing the buyer decides to open a new credit card account at a store to take advantage of the 10% off, or some other new credit is opened at the last minute…this means underwriting to stop and ask questions, generally causing a 2 to 3 day delay.
• Appraisers are very backed up and some appraisals will take 2 to 3 weeks to complete.  Now, even the lender has very little if any control as to who is even chosen for the work.  Leaving the entire transaction at the mercy of the appraisers schedule.
• Employment has to be verified, then re-verified, then triple verified!  Hope the entire HR department doesn’t get the flu!
• Doing a Jumbo loan?  The amount of paperwork required is maddening.  Be prepared to account for EVERY SINGLE penny you have.  Not kidding!  Last minute bonuses from work will cause the underwriter to stop and ask questions.
• Buying a condo?  Be prepared for a minimum of 25% down or else a full review has to be done on the condo project.  This will easily take a week, just for that process.  Nothing else can be done until that’s complete.

Each of these are examples of actual circumstances that caused delays for many transactions over the last few months.  The job of the real estate agent has changed over the years.  We spend 85% of our time actually getting the deal closed.  Make no mistake…having a good agent on your side WILL help your closing successfully take place.  The days of easily being able to sell by owner are most definitely behind us.
I don’t say this lightly…yes, it is good job security.  At the same time it is also a lot more risky.  Everything truly has changed.  Agents are finding that we are spending tremendously more time engaged in the closing process due to the increased liability, increased regulations, increased buyer demands and decrease of flexibility sellers can afford.

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