Sandy victims selling ruined homes 'as is'
Along Long Island's South Shore, storm-ravaged homes are selling at steep discounts, as worn-out homeowners struggle with the high cost of repairs and their doubts about whether government aid will materialize.
The number of flooded, as- is homes listed for sale isn't known; anecdotal evidence suggests the number is growing. Experts worry that Sandy-damaged homes could -- at least temporarily -- drag down values of nearby properties and impede the still-anemic recovery of Long Island's housing market.
It also has some real estate analysts concerned that home sellers may be missing out on a potential windfall, as the federal government prepares to send New York a first infusion of $1.7 billion to help the region recover from Sandy.
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Gov. Andrew M. Cuomo on Tuesday released his plan for the funds, including a proposed $492 million to repair or replace homes and protect them from future storms. The grants are intended to cover the full cost of repairing homes, and in many cases storm-proofing them, according to the state. The federal Department of Housing and Urban Development has 45 days to approve the plan. New York officials say they will push to get money into homeowners' hands as quickly as possible.
The state also intends to spend $171 million buying out homeowners in high-risk areas.
Real estate experts say Sandy victims should consider waiting to see whether the new grants will help them repair and, in some cases, elevate homes to meet federal flood standards, possibly at no out-of-pocket cost.
Owen Cumisky has listed his family's waterfront Massapequa three-bedroom ranch for $299,000, about $150,000 less than its appraised value before superstorm Sandy hit on Oct. 29. In online real estate ads, the home looks like a toy house partially demolished by a child, with the roof over its once-picturesque great room caved in.
It would cost the family at least $50,000 out of pocket to elevate the home above a future storm's reach, Cumisky estimates. Even if he were to spend that much on rebuilding, he said, "I'm not sure I could sell it for what I owe on it."
Price impact may linger years
The price impact of even a devastating storm tends to fade over time, say those who have studied earlier natural disasters. Such storms typically cause prices to fall by 10 percent, but that dip generally disappears within a few years, said Robert Simons, a professor of real estate and urban planning at Cleveland State University.
In Miami, Hurricane Andrew slowed year-over-year home price increases for about six months after its August 1992 landfall, but then prices resumed a steeper upward climb, according to federal housing data. "If you leave, then you give up the opportunity to participate in the recovery," said Andrea Heuson, a finance professor at the University of Miami.
Home prices in New Orleans fell after Hurricane Katrina hit in 2005, but rebounded by 2010. Especially in affluent areas, home prices are likely to rally "because probably they have the resources and the insurance proceeds to rebuild," said Ivan Miestchovich, a finance professor at the University of New Orleans.
But for some owners of Sandy-damaged houses, wallets and patience are wearing thin.
If federal help is coming, it had better arrive fast, said Jeri Blum, who has listed her four-bedroom home in Long Beach for just under $580,000, about $170,000 less than she would have asked before the storm.
"When is this all going to happen?" asked Blum, who has ripped out damaged sections of her first-floor walls. Now she must decide whether to install new plumbing and electricity, or wait to see if she can get federal funding to elevate the structure.
"In a way I would love to do it," she said, "but I can't wait five months."
NY aims to prevent abuse
The new grants proposed by New York would be funded by the first infusion of the nearly $51 billion in Sandy aid signed into law in January.
New York officials have promised they will act quickly, and point out that they released their plan for the funds only a week after the federal government published guidelines for the program.
A spokesman for the Cuomo administration said the state will establish policies to prevent abuse of the system. The funds will be paid out either directly to contractors or as reimbursements to homeowners, not in cash. Also, the state aims to prevent people who buy homes after the storm from receiving grants to rebuild, the spokesman said.
Despite the promised aid, homeowners are listing flooded homes for sale as is. "Either people didn't have the money to fix up the homes, or they didn't have the heart to fix up the homes," said Thomas Tripodi, a real estate agent with Douglas Elliman in Long Beach.
For repairable homes, sellers factor in the cost of repairs plus an additional "hassle" discount -- typically 10 to 15 percent, brokers say. For wrecks, they merely aim to recoup the value of the land.
In Massapequa, 17 for-sale listings contained the words "as is," according to a search of the Multiple Listing Service of Long Island's database on Friday. In Long Beach, there were 21 "as is" listings. (Not all storm-damaged home listings use the words "as is." Also, some listings could be "as is" for reasons other than storm damage.)
"We're just hitting the tip of the iceberg in terms of damaged homes that are coming out," said Jennifer Ronzo, a real estate agent with Coldwell Banker Harbor Light in Amity Harbor.
Investors see an opportunity
The as is listings have attracted the attention of investors who plan to buy such homes -- in many cases with cash -- refurbish or rebuild them and eventually resell.
Developer Kurt Wittek is among those aiming to rebuild Long Beach homes to FEMA standards for high-flood-risk areas. He said he is examining about 15 potential purchases, and could spend as much as several million dollars.
The new homes would be elevated above garages, with lower insurance premiums than their street-level neighbors, he said.
"All of the non-FEMA-compliant homes are going to have a depressed market value, because they probably are uninsurable at any kind of number that one would want to pay," Wittek said.
It would not make sense to rebuild a flood-prone home without elevating it, said Peter Chaplin, whose waterfront Massapequa home was ravaged by Sandy. However, it would cost more to rebuild and elevate his home than to buy a new one, he said.
Chaplin is skeptical about his chances of getting an adequate federal grant, considering the "red tape" he has faced so far in dealing with his mortgage lender and local officials. With the family renting a home elsewhere, he said, "it basically comes down to timing."
Cumisky, also in Massapequa, has his doubts as well. The property taxes on a rebuilt home would likely be unaffordable, he said. Even so, he remains open-minded.
"If somebody were to give me $100,000 to raise and build a new house and if there was some clarity on what the town was going to do with our tax structure, yeah, I would reconsider," Cumisky said of his plans to sell. "That would be like a miracle."
RESOURCES FOR HOMEOWNERS
For information about Federal Emergency Management Agency programs, and to register for aid: www.disasterassistance.gov
For information about New York programs funded through the U.S. Department of Housing and Urban Development, and to register for aid: nysandyhelp.ny.gov
RESOURCES FOR HOME BUYERS
Buyers of storm-damaged homes can access special loan programs designed for fixer-uppers, said Michael McHugh, chief executive of Continental Home Loans in Melville and chairman of the Empire State Mortgage Bankers Association:
Federal Housing Administration low-downpayment 203(k) loans cover the cost of purchase, rehabilitation and repairs. Visit portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/203k/203kabou
FHA 203(h) loans for disaster victims require no down payment. Applications required within one year of federal declaration of a natural disaster.
Fannie Mae's HomeStyle loans fund purchase, repairs and renovations. Visit https://www.fanniemae.com/content/fact_sheet/homestyle-renovation-factsheet.pdf