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Insurance rates, property damage slow closings
The lights are back on and debris around the Island has been picked up, but superstorm Sandy has apparently left other problems in its wake: rising rates to insure property and damage resulting in renegotiations that are slowing down some sales.
No one is saying sales are being lost because of the insurance problems or storm damage. But there are renegotiations happening for some because of storm damage while other deals have been slowed until buyers can secure insurance on the properties.
The difficulty of getting insurance has come up among agents in the Corcoran Group, according to senior managing director Joseph DeSane. “But I can’t say deals have fallen apart,” he said. There are always going to be companies out there that will insure properties, he added.
“Deals have been delayed,” broker Melina Wein of M. Wein Realty said. She had three deals she expected to close in early November that instead closed this week.
“It took a lot of work and a lot of perseverance,” Ms. Wein said.
One broker who asked not to be identified talked about a deal that had to be renegotiated at the last minute because of damage to waterfront property caused by Sandy. Ultimately, the seller had to come down in price, but a new deal was able to be struck, the broker said.
“We do have to recommend several sources about insurance,” Daniel Gale/Sotheby’s associate broker Susan Cincotta said. Insurance is not always reasonable and “you have to shop around,” she said.
Insurers said it can cost anywhere from less than $500 to as much as $17,000 more a year than typical rates to insure a house in the flood plain. John Stype of The Neefus Stype Agency warned that some companies like Lloyds of London will write policies, but, buyer beware. Those policies may not be as comprehensive as the new homeowner expects.
In general, he anticipates Sandy to result in higher insurance rates for many, noting that a hurricane “can send prices soaring.” A lot of the increase results from reinsurers who charge more to insurance companies to mitigate the insurers’ risks.
Still, Mr. Stype hasn’t heard of any real estate deals being lost because of insurance.
Some properties absorbing major damage in the wake of Sandy were in the no-brainer area — because buildings were erected too close to the water, according to Shelter Island building permit examiner Mary Wilson.
“It’s all the more reason you should uphold your ordinances,” she said. The building department doesn’t want to hinder deals or stop people from doing as they please with their properties, she said. But ordinances exist to protect property owners from building in areas where they could face threats of flooding or other severe damage as well as for environmental reasons, she said.
“Be sane; move it back,” she said.
For a full story on how Sandy is affecting real estate sales, see the January 3 Reporter.