Contractors elevate a home at 10th Street and the bay. Properties above a specified 'base flood elevation' will pay far less in flood-insurance premiums under new legislation and knowing an existing property's elevation becomes increasingly important. Photo credit: John Ball
In Ocean City's bustling real estate market, "location, location, location" has been replaced by a new adage: "elevation, elevation, elevation."
But home buyers are no longer required to produce an elevation certificate to learn the actuarial (full risk) rate of insuring their property against a flood before they close a deal.
The April 2014 Homeowner's Flood Insurance Affordability Act (HFIAA) undid a provision of the 2012 Biggert-Waters Flood Insurance Reform Act that included the elevation certificate requirement.
Although that actuarial rate might remain a mystery for those who have recently purchased "pre-FIRM" homes — built prior to the 1975 adoption of the first flood insurance rate map — ignorance is not necessarily bliss.
After decades of taxpayer subsidies to bolster the National Flood Insurance Program, now billions of dollars in debt, the HFIAA calls for annual increases in flood insurance premiums until actuarial rates are achieved. Without an elevation certificate it is virtually impossible to know when a homeowner has paid too much, according to Bill McMahon III, president of the McMahon Agency.
"A lot of times [a home's elevation] isn't as bad as you think. But you need to know where you are at, you need to know that worst-case scenario, because the rates are only going to go up," he says.
Tom Heist, president of Thomas H. Heist Insurance Agency of Ocean City, says that even owners with no intention of selling their homes can benefit from ordering an elevation certificate. In addition to specifying the elevation of a home's first-floor of living space, the certificate documents whether a home has adequate flood venting, its crawlspace grade and the location of mechanicals like central air conditioning condenser units, each of which can dramatically affect premiums.
"If we have an elevation certificate on file, we will rate the property both ways — with the elevation certificate and without — and give the owner the lesser of the two," Heist says. "It won't be used against you."
While some sellers in Ocean City have been reluctant to obtain an elevation certificate, leaving buyers to foot the bill while in escrow on a home they don't yet own, Coldwell Banker agent Lauren Perkins says others are taking the initiative.
"If you are a smart seller you will find out everything you can about your property before you list it, and that includes the elevation," Perkins maintains. "Sellers should do their homework up front. Ultimately, it makes their property more marketable."
The question of which party — buyer or seller — bears responsibility for obtaining an elevation certificate appears to have no clear cut answer.
Edward Rogan, a spokesman with the New Jersey Department of Banking and Insurance, which regulates the real estate industry, says that agents are required to "disclose all information material to the physical condition of the property which they know, or which a reasonable effort to obtain such information would have revealed."
FEMA, in a fact-sheet for Realtors, maintains only that "buyers can ask sellers to provide an elevation certificate" but sellers are under no obligation to comply.
Adam DeSanctis, a spokesman with the National Association of Realtors, says that elevation certificates — like most home inspection-related issues — are negotiable between a buyer and seller and are "not something that one or the other should be responsible for paying."
Despite that lack of consensus, business has been brisk for Egg Harbor-based land surveyor Jim Boney as warmer temperatures spark home sales along the Jersey Shore. "People want to know what their insurance liability will be, especially when buying in a coastline area" according to Boney, who estimates that the requests he has fielded have been split "about 50-50" among buyers and sellers.
"The seller's agent is asking, 'What do I have to do to make this house sellable?' And so they will get the seller to order an elevation certificate, just so that it's on hand and it becomes part of their package for a buyer. If they are the buyer's agent, they will go to their client and say 'If you're serious, and you're interested in this house, order the elevation certificate and incur the cost,' " Boney says.
"Some agents that are really proactive will actually pay for the elevation certificates themselves," he adds. "It's worth it to them if they can move a sale along and get the deal done."
Ocean City Board of Realtors President Gloria Votta notes that the need to order an elevation certificate can often be negated with a quick phone call to McMahon or Heist. "If they already have one on file for a property, they will usually let us know what the elevation is," she says.
But when no pre-existing elevation certificate can be located, or when a pre-existing elevation certificate has become outdated, Votta believes that buyers should strongly consider ordering it themselves.
"It's too important, too big of a deal, to not know your elevation. If you're going to invest half-a-million dollars in a house, spend the extra few hundred on the certificate. It's a small price to pay," Votta says. "Especially when not knowing the elevation could cost you more money down the road."
McMahon agrees.
"Investing in a shore property is one of the largest assets you're ever going to have. An elevation certificate is money well spent," he says.
