Little Egg Harbor Township sees sale price of homes take a pounding from Hurricane Sandy
LITTLE EGG HARBOR TOWNSHIP — For Sale: Waterfront home. No walls, floors, windows or insulation. Flood damaged, will sell cheap.
This mainland township, with its large waterfront community, has seen at least 4,017 of its homes affected by Hurricane Sandy. While many homeowners are repairing their properties, others are either unable or unwilling to do so.
Hundreds of homes are now, or soon will be, for sale. Their condition, however, and financing roadblocks could make them difficult for real estate agents to market and sell.
In the once-hot location of Mystic Islands, for instance, homes are being offered at a considerable discount. Mystic Islands is the section of the township that was hit hardest by Sandy almost four months ago. There are 4,922 homes there, of which 2,865 are on the waterfront, township Tax Assessor Joseph Sorrentino said.
Mystic Islands was built in the early 1960s as a vacation community. Its homes were mostly bungalows. In recent years, however, many people have chosen to live there year-round. Some newer homes have been built on piling in anticipation of stormy coastal weather.
There has been no breakdown of the number of homes that sustained substantial damage solely in the Mystic Islands section, but townshipwide it’s about 2,000 properties, Sorrentino said.
Selling those homes at discount prices may affect the township’s ratable base.
“Right now, I’ve heard some people are being encouraged to drop home prices based on arbitrary information and by Realtors. We don’t create the market here, buyers and sellers do, and if they accept that, (lower prices) and move forward, it will affect the ratable base of the township down the road,” Sorrentino said.
Township Committeeman Ed Nuttall, a real estate agent with Homeport Realty, said owners of damaged homes face several challenges.
“There will be no mortgages on houses that are not livable. The banks are not going to lend. These have to be cash buyers, which will be a very inexpensive deal, but they will have to assume the risk of the future,” Nuttall said.
Most recently, home sale prices in the township have ranged between $65,000 and $100,000. A year ago, similar properties sold for $170,000 to $250,000, Nuttall said. The average assessed value of a home in the township was $258,000 last year.
“Owners are at a standstill. They don’t know where to go or what to do. They’re devastated. They’re frustrated and upset. Banks are stonewalling like crazy on these deals,” Nuttall said.
But Chuck Reed, a mortgage planner with Acre Mortgage in Galloway Township, said there are banks that are lending, but only under specific mortgage programs.
“FHA has programs that allow you to buy properties as-is and do the work after the sale, with six months to complete the purchase. But if you just go to a bank to get a mortgage for a property like this, it’s not going to happen,” Reed said.
One of the loan programs that would be applicable is the Federal Housing Administration’s 203K Rehab Mortgage, Reed said. The mortgage allows the cost of the property’s rehabilitation to be included in the mortgage amount total. All repairs to the property must be made after closing on the property, and no work may take place prior to taking ownership. A purchase of an as-is property qualifies under this program, regardless of its condition.
Although most sales on storm-damaged properties have been cash deals, that does not mean there isn’t rehabilitation money available, said Frank Montufar, also of Acre Mortgage. Cash closings are also typically quicker — many times within 15 days. A closing for a rehabilitation loan can take as long as 60 days, Montufar said.
Nuttall has four listings of flooded homes for sale in the township, he said. His latest sale was a home on Portland Drive that was owned by a retired couple and had four feet of water during Hurricane Sandy.
“This retired couple was at their wits’ end and couldn’t afford to keep paying the flood insurance. They were asking $124,900, and it sold for $90,000 in a cash deal to a home remodeler from North Jersey,” Nuttall said.
Another of Nuttall’s flooded listings is on West Anchor Drive and is priced at $134,900. The property is saddled with complications that will make it a difficult sell as a result of the storm.
“The owners got a determination from the township for it having substantial damage, meaning that it has to be knocked down or raised up, and that makes a complication in the sale for the buyer, who may have intended to just fix it up where it is needed. A buyer can’t do that now,” he said.
Donna T. Wilson and William Filiciello of Coldwell Banker Riviera Realty said the homes that are for sale in the township represent an opportunity at the expense of a tragedy.
“It comes down to that people like living in Mystic Islands because they like having their boat in their backyard,” Filiciello said.
But Hurricane Sandy showed there’s a price to pay for living on the waterfront, Wilson said.
“One of the listings I have, you cannot even walk inside the house because there is no subflooring. As a Realtor, I don’t even know if the house is structurally sound,” Wilson said.
Filiciello has two listings that are being sold as-is and are under contract as knockdowns. Buyers interested in these low-end priced properties are investors looking to knock down and rebuild, Filiciello said.
“It’s going to be difficult moving forward and rebuilding because the advised base flood elevation has been raised to 12 feet, and we’re in a V zone. Almost 99.9 percent of the houses on slabs here are going to be uninsurable or the rates will be very high — up to $31,000 a year. No one expected this,” he said.
V zones, or velocity zones, are the higher-risk areas identified under newly proposed Federal Emergency Management Agency advisory flood-zone maps. Homeowners in the zones would need to prepare for high wave activity, while those in the lesser-risk A zones would only have to meet requirements dealing with storm-surge flooding.
Owners who don't meet the V-zone standards, which include installing piling and breakaway panels to allow the waves to roll through, may have to pay more for flood insurance if they have a federally backed mortgage.
Richard Kitrick, a resident and attorney in the township who handles many real estate transactions, said the market was already at the bottom when Sandy struck and now homes are being listed at even lower prices.
The homes in Mystic Islands were not meant to be permanent structures but weekend bungalows when the area was developed in the 1960s, Kitrick said. Now, with the damage the small homes suffered during Sandy, it is going to be cheaper and more efficient to tear them down and rebuild, he said.
“I’ve closed on four properties in the last three weeks. Waterfront lots are closing between $57,000 and $90,000, and a year ago they would have sold for over $100,000,” he said.
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