Questions and answers on purchasing coastal real estate in North Carolina [2014]

the sea), unless natural shoreline recovery or beach nourishment takes place within two years and the structure is no longer threatened. [For information on site-specific erosion control projects, contact your local permit officer or the N.C. Division of Coastal Management J Q: Can I get insurance for damage resulting from erosion and flooding? A: Probably, but not always. You may be able to purchase a flood insurance policy (separate from a standard homeowner’s policy). The National Fkx>d Insurance Program (NFIP) makes flood insurance available nationwide to eligible properties. NFIP policies are written by private insurance companies for a processing fee and included federally-mandated terms and costs. Discounts on annual premiums are available for buildings in some flood zones if constructed above the minimum floor elevation standards. To determine if NFIP insurance is available in your area, contact your insurance agent or see N.C. flood maps online at: http://www.ncfloodmaps.com/. For elevation discounts and tips on rating existing buildings, see: http://www.ncfloodmaps.com/ pubdocs/grandfatheringjetter.pdf. Determine the availability and cost of flood insurance in advance, and any limits on coverage. Private insurance coverage may be available for excess flcxxl coverage or property' not eligible for die NFIP Q; Is flood insurance mandatory for coastal property? A: Sometimes. If die property is in an identified flood-prone area, federally insured lenders, including most banks, savings & loans and mortgage lenders, are required to have the building owner provide proof of flcxxl insurance coverage for the life of the lien. Outside flood-prone areas, lenders still may require flood insurance to protect their lien and to declare the balance cf the loan due and payable if coverage is not maintained. If a loan is not federally insured or there is no loan, no law requires flood insurance. Flood-prone areas are identified on Flood Insurance Rate Maps. (See above for sources.) Even if not required, when building or buying near the ocean, flood insurance is always a gtxxl idea. [For information about flood insurance and discounts contact your local building official, insurance agent, the North Carolina Floodplain Mapping Program or the National Flood Insu rance Program J Q: What are the limitations of flood insurance? A: Federal flood insurance covers only building and contents damage — including damage from waves — caused by flooding. Technically, damage caused by chronic, long-term erosion is not directly covered unless it occurs during a storm event, which is almost always the case. Federally-backed flood insurance coverage does not cover damage to the land caused by flood, waves or erosion. Therefore, much of the purchase price for oceanfront property' is not insured if the land erodes. When a building is so damaged drat it cannot be repaired or rebuilt, flood insurance may be inadequate to cover the cost of removing the structure and/or repaying the loan. Even if the building is undamaged, erosion that makes the lot "unbuildable" for new construction may cause the property' value to significantly decline. Q: Should a prospective buyer inquire about flood insurance premiums before buying? A: Yes. Congress passed the Biggers/Waters Flood Insurance Reform Act ("Act") in 2012. FEMA began implementing this Act in 2013. The Act raises flood insurance premiums for some properties. As of February 2014, it had impacted about 10% of die flcxxl insured buildings (coastal and river-front). Another 10% could be affected if sold or purchased. The remaining 80% are scheduled to be implemented in 2014 widi few details yet released. There have been discussions in Congress regarding a delay for the remaining 80%. ’lire implemented changes will have little or no impact on some buildings. However, under the Act it is possible for a single family house purchased after July 2012 to have a fltxxJ insurance premium of $50, 000/year. If the owner has a federally-insured mortgage, then the owner is required to purchase die flcxxl insurance. Also, buildings that were exempted under die law could lose their exemptions when sold. It is impossible to predict when or if Congress will modify' or delay the implementation of the Act. Additionally, all 20 of North Carolina's coastal counties are scheduled to get new flood maps in 2014. The best advice for a prospective buyer is to research this issue thoroughly before making a purchase decision. V’ ТП Q: Can I get insurance for wind damage to coastal property? A: Probably. Because of the high risk in coastal areas, some private insurance companies exclude coverage for wind damage. For that reason, the N.C. Department of Insurance lias established the Coastal Property' Insurance Pool, formerly known as the “Beach Plan,” to provide wind coverage in areas where it is not otherwise available. [For more information about the Beach Plan or homeowner’s policy coverage, contact pur insurance agent or the North Carolina Department of Insurance.] Qj Can I rebuild or repair my building if it is damaged by a coastal storm, fire or other hazard? A: Maybe. If the damage is less dian 50 percent of the building’s market value immediately prior to the damage, you may be able to repair it at its original location. However, if the building is more than 50 percent damaged, repairs must meet the latest setback requirements, floodplain regulations and other building code requirements. Permits are required, as if it were new construction. In addition, repair or replacement on the lot would be prohibited if erosion lias left insufficient space to meet the setback at that time. Purchasers should determine if the lot and building presently meet the setback for new construction and eligible for a replacement building, keeping in mind the risk diat erosion may make die lot unbuildable in the future. ADDITIONAL INFORMATION: • North Carolina Division of Coastal Management 252-808-2808 / 1-888-4RCOAST (1-888472-6278) www.nccoa sta lmanagement .net • North Carolina Real Estate Commission (919)875-3700 www.ncrec.gov • North Carolina Department of Insurance For general information: 1-800-546-56(4 http://www.ncdoi.com/ “Beach Plan” information: 1-800-662-7048 http://www.ncjua-nciua.org/ • National Flood Insurance Program http://www.floodsmart.gov/floodsmart/ http://www.ncfloodmaps.conV • Local Building Officials Call the local town hall or county municipal building. AUTHORS: • Lisa Scbiavinato & Walter Clark (retired) North Carolina Sea Grant Coastal Law, Policy and Community Development Specialist 919-515-1895 lisa_schiavinato@ncsu.edu • Spencer Rogers North Carolina Sea Grant Coastal Construction and Erosion Specialist 910-962-2491 rogerssp@uncw.edu www.ncseagrant.oig This work was partially supported by grant NA46RGO087 from the National Sea Grant College Program, National Oceanic and Atmospheric Administration, to the North Carolina Sea Grant College Program. UNC-SG-96-10 Scan the code below to access the Commission Web site from pur mobile devices. THE NORTH CAROLINA REAL ESTATE COMMISSION P.O. Box 17100 • Raleigh, NC 27619-7100 Phone: 919/875-3700 • Web Site: www.ncrec.gov 5.000 copies of ibis puttie document were printed at a cost of S. 000 per copy. HP rrr rf Г A Rg|[ jgg RFC 3 35 3/1/14