Before you decide to buy a waterfront home in this beautiful part of Florida there are a few things you need to keep in mind. A waterfront home may be the biggest investment of your life so it’s important to educate yourself fully before making the commitment.
To ensure the credibility of this article I’ve reached out to my trusted mortgage lender, title representative and insurance agent to fact check everything I’m reporting. With that said, here are the Top 8 Things To Keep In Mind When Buying A Waterfront Home Near St. Pete, Florida!
8. Flood insurance
If you finance a home, your lender will require you to carry a flood insurance policy along with your regular homeowners insurance. If you buy your home cash and live in a waterfront house it’s not necessary to get flood insurance, however with the chance of a storm surge you would be smart to consider having everything insured properly – A homeowner’s policy does not offer protection from flooding waters or storm surge.
You can obtain flood insurance through the National Flood Insurance Program or through a private insurance carrier. Typically private carriers will provide more favorable rates, but it’s best to ask an educated insurance broker to review all the available options to see which one best fits your needs. Part of our due diligence during an inspection period is to get you set up with insurance quotes so you know what to expect. We can even do this before we secure a contract so that there are no surprises.
You’ll notice that the vast majority of waterfront homes are built from block construction instead of wood frame. Block homes are of course more sturdy and resistant to hurricane force winds. An inspector can point out other various protections from hurricanes including impact resistant windows and hurricane straps to secure the roof. The higher the build quality the lower your insurance will be in most cases.
There are tons of homes down here that don’t have impact resistant windows – many are equipped with knobs around the windows to secure an impact resistant shield. Many people assume that new windows are impact resistant but not all of them are. This is something we can find out during the home inspection so you can prepare accordingly. We’ve been very lucky with major storms in the past century however it is better to be safe than sorry.
6. Boat/Riperian/Littoral rights
When you buy a waterfront home, like any other home you will need a survey to understand the perimeter of your property. Your property will typically end right at the seawall. So how do you figure out what kind of water access you have and the size of the dock/boat you can keep on your waterfront property?
These regulations vary so the best course of action is to enlist the help of the title company or a real estate attorney during our due diligence period to clarify your waterfront rights. In Pinellas County the seller typically picks the title company however we can recommend a reputable title company to do this research and we can write up the contract so you are able to use them to close. You as a buyer are able to employ a real estate attorney to look over documents and provide advice without charging you for all of the title work and the owner’s insurance policy. This is something we should look into especially if you are planning on building a dock or have a large boat that you plan on docking at your residence.
A seawall is going to be one of your biggest expenses when buying a waterfront home. Just as the roof protects your home from the rain, the seawall is the concrete wall that ensures protection between your property and the ocean by preventing erosion.
Typically sea walls last for between 30-50 years or as little as 20 if they are not properly maintained. A home inspector will be able to give you an idea of the remaining life expectancy of your sea wall. Our go to home inspector is DG Inspekts.
Seawalls are not typically insurable so it’s important to get an idea of the remaining life expectancy in order to budget for a new one. This is something we will review after your home inspection to determine if negotiations are necessary.
4. Resale value
Not all waterfront properties are the same. A location with direct water view will retain it’s value more than a home located on a canal. A home directly on the beach will carry most of it’s value in the land and therefore be the most expensive.
A home on a canal with height limits for boats will retain it’s value less than a home on a canal with direct bay/gulf access. Depending on your boating lifestyle, you may want to weigh all these options before buying waterfront.
3. Talk to the neighbors
There are some things that you’re only going to learn by talking to someone local. For example – We have a ton of flood zones in the Pinellas County area but some of them don’t flood at all and others turn streets into rivers. Shore Acres is a beautiful neighborhood that lots of people love living in however it’s notorious for the streets flooding, even at high tide sometimes in the right conditions.
Many times it’s easy to just talk to a neighbor that happens to be walking by when you’re viewing the home or at the inspection. We’re not afraid to go knock on a door and get the insider scoop for you too. Just let us know what questions you have about the area and if we don’t know we will find out.
2. Financing – Jumbo loans
If you’re buying waterfront property, you are more than likely going to be considering homes above $500,000. If you’re planning on financing your new home, you will need to obtain a jumbo loan which has more stringent requirements than standard financing.
According to Investopedia.com “A jumbo loan is a type of financing that exceeds the limits set by the Federal Housing Finance Agency and cannot be purchased, guaranteed, or securitized by Fannie Mae or Freddie Mac. Homeowners must undergo more rigorous credit requirements than those applying for a conventional loan.”
To obtain a jumbo loan you will need a combination of excellent credit, a great debt to income ratio as well as liquid assets to show that you are ready to handle those larger than average monthly payments.
Jumbo loans used to require larger down payments – up to 30%. Regulations have loosened a bit and now some of these loans can be obtained with as low as 10% down. We can always provide you with an estimate of what your monthly payment would be so you have a good idea of what to expect after we close. This estimate includes your monthly mortgage payment with the interest rate and downpayment factored in and private mortgage insurance if necessary. On top of that we will factor in estimated taxes, homeowners and flood insurance, also HOA fees if applicable.
Loans are not my speciality which is why I enlist the help of my go to mortgage broker Justin Kelly. There are plenty of garbage mortgage lenders out there but Justin is top notch. You can get started with his pre-approval process here – or I can ask him to give you a call if you have any questions. Here’s a couple of points Justin wanted to add.
- A jumbo loan is a loan amount exceeding $484,350 however in 2020 they are looking to increase that to $510,400. Technically the minimum sales price of a jumbo loan would be $567,111 then putting down 10% would get you to $510,400.
- The traditional way to attack the jumbo world is with one loan. There are also creative ways to split the two loans up, 1st at max loan limit and then a 2nd mortgage for the difference still allowing as little as 5-10% down. Depending on the clients goals and/or near future plans this may be a better financial route to go. It also helps get away from the stricter jumbo guidelines that we have to follow.
1. 50% rule for improvements
Basic rule: If the cost of improvements or the cost to repair the damage exceeds 50 percent of the market value of the building, it must be brought up to current floodplain management standards.
The vast majority of waterfront homes in Pinellas County were built during the 1950’s. Now almost 70 years later, we’re reaching a point where in some cases the land value is starting to tip the scale. Now waterfront home buyers need to decide whether they’d prefer to maintain and upgrade an aging structure or raze it and build new.
Sometimes small lot size and set back rules prevent the construction of new, larger homes that would increase the overall value of the property so homebuyers are forced to upgrade the existing structure. If this is your plan, you need to know about the 50% rule. This is something that needs to be researched in depth and discussed with contractors before making additions and improvements to your home. The best place to start your research is right on FEMAs website here.
If you do happen to over improve your home, you may need to purchase insurance from a private carrier which will offer you options for affordable flood insurance. If you do this properly in line with FEMA standards, you will be eligible for more affordable insurance options. Having the most options for affordable insurance will also be one of the best things you can do for your resale value.
Feel free to reach out to Jessica Wilson at Brightway insurance with any questions you have about homeowners or flood policies.
Are you ready to start the process of finding your new waterfront home? Maybe you just want us to get you set up on an MLS search so you can see what’s active on the market? We can also set up your search so you can see what these homes are selling for. Feel free to leave your contact information and anything else we should know below and we’ll get in touch with you ASAP!