Many homes damaged by Hurricane Sandy are selling at bargain prices, and more are expected to hit the market during the spring and summer selling season at reduced rates for potential homeowners and investors.
While some homeowners already have begun the rebuilding process, many others are overwhelmed by the task ahead of them, and the houses remain untouched nearly five months after the storm. Some people may be waiting to see new flood maps, zoning regulations and building codes, or find out what future flood insurance costs will be. Others simply don't have the funds or the energy to rebuild.
"I think there will be hundreds of homes sold for less than their value was before the storm because they are in some state of disrepair," said Jeffrey Otteau, president of the East Brunswick-based Otteau Valuation Group. "In many cases, the cost to repair is more than the homeowners' ability to afford. I think right now many homeowners are hoping the insurance money will come through, and they can hold on and figure out a way to put Humpty Dumpty back together after falling off the wall."
The money to repair damaged homes is coming in slowly because of the sheer volume of claims that need to be processed, along with worry that the government sequester will cut off or slow down funding. If there is not another extension of loan forbearance, it will expire in early May, and homeowners who were given a reprieve from mortgage payments and late penalties may be faced with foreclosure.
"It's yet another complication that is waiting in the shadows," he said.
Otteau said many of the homes that were destroyed had no flood insurance because the homes have been passed down several generations, and flood insurance is only required when there is a mortgage.
"Even if they had flood insurance, they may have suffered damage that is greater than the coverage maximum," he said.
Otteau said he believes many homes will be sold as-is to investors willing to take on the rebuilding projects as business ventures — buying the properties at a discount and selling for a profit.
Along with this uncertainty and the fact that flood insurance rates and property taxes will likely see a sharp increase, the selling price for undamaged homes in affected areas has seen a dramatic decline, and may go even lower, Otteau said.
"It's all negative for homebuyers, but it will bring the investors in," he said.