Frequently asked questions from Buyers
What are the differences with insurance here?
You will usually have three policies. A flood policy, wind/hail policy and a fire/theft policy. A single insurance agent can arrange a quote for all three. It is often a good idea to find who has the policies currently and get a quote from them since they already have the property covered.
How much does flood insurance cost?
Surprisingly it is not the most expensive policy of the three. Wind/hail is several times more expensive. A typical flood policy, for homes here, will cost under $900/yr. These policies are transferable to the new owner, the others are not. The max coverage is $240k through FEMA which covers only the building.
Why is wind/hail so expensive?
Just like the flood policy, wind/hail is written with one company so there is little to no competition. When we get damage here from storms it affects homes along the oceanfront because of the water, but the high winds will affect homes all over the Outer Banks, not just near the ocean. These policy prices will vary, based on house value, from $1800/yr to several thousands for larger homes.
Why are some oceanfront homes so inexpensive?
We hear this one a lot. The small oceanfront homes in Kitty Hawk and South Nags Head are good examples of inexpensive oceanfront homes. North Carolina has a set of laws called the Coastal Area Management Act or CAMA, these laws dictate what can and can’t be done on or near the oceanfront. Simply said the law says these small homes are grandfathered to be allowed to stay there but they can not be rebuilt if substantially damaged. You also can’t buy and tear down and rebuild, the lots are too small to allow rebuilding, so they are there as long as they are there and then gone forever. This makes the price less attractive and lower. Many take the risk because they could be there another 5-10 years and they rent GREAT. 10% is not uncommon.
Can you rebuild any oceanfront home?
It will depend on the size of the lot the house is on. Small Kitty Hawk lots on the oceanfront are small, 50×50 maybe in some cases. Larger lots, like in KDH or Nags Head, are much larger and these can rebuild, or tear down and rebuild. The rule is building must be 60ft behind the vegetation line so small lots are too small. That also ads to its value and why the lot alone could be $800,000 or more.
If I own an oceanfront do I own the beach too?
You won’t own to the water line or high tide line, that area is public beach anyone can walk on. That does not give them ingress over your lot to get to the beach though.
How much down payment is needed for a loan?
Most loans we see here are Conventional loans. The down payment is a function of the loan conditions so the lender will have to tell you what they require. While 20% down is common, I have seen 10% for investment loans too. We suggest you contact a couple lenders and ask.
Must I use a local lender for the loan?
No, you can use any company licensed to do business in NC. We suggest you speak to a local lender, as well as one near you, to compare. Some lenders don’t understand the in’s and out’s of Vacation Rental Investments and they won’t allow you to rent it. Since 90% of the homes we sell here are rental investments those lenders will not work out well for you.
Where is the best place to buy an investment property?
This is a hard question to answer, it really depends what area(s) you like. Each area has things similar to everywhere else and some have things unique to it and not anywhere else. A good rule of thumb is the closer to the ocean the better for rental income. Your agent can help guide you if you don’t have an area that you have already decided on. Price can also help narrow down some areas.
Are sound side properties expensive?
Since they are waterfront they can be expensive, but usually less than oceanfront. An old real estate saying about waterfront property prices is, “God is not making anymore of it”.
When is a good time to buy?
We have two good selling/buying seasons here, Fall/Winter and Spring. Buyers looking for a year end sales deal often come out in the fall. Showing homes in the fall and spring are easy because they are not rented. Showing and selling homes in the summer is tough because the homes are rented and those renters do not have to allow it to be shown to buyers. Often the only chance, in the summer months, is on the turn-over day. Often that is Saturday between 10-1pm.
How is the rental income money dispersed?
In general the rental income starts coming in to the management company in January as renters pay their 1st half of the rent that will be due. The management company takes out their agreed commission (these vary and are negotiable) and they send the rest to the owner. Whoever owns the house when the rental actually occurs gets the rental income money. If some was sent to the previous owner before the sale and before the rental occurred the the new owner gets all that money. This will be dealt with at the closing and any due money will be given to the new buyers then.
Who does the closing?
North Carolina uses a lawyer for each side, seller and buyer. Your lawyer will prepare all the documents and record and disperse funds. We don’t all sit around a table, in fact you don’t even need to come here, you can have the documents FedEx to you and then send them back and they will record the sale – that is the closing. Your agent can suggest a lawyer for you if you would like.
Should we get a home inspection?
The easy answer is YES. Your agent will give you several names to contact and discuss the inspection. The inspector will deal with you, not me. Costs will be around $350-500.
I want a 2nd home not to rent out, where is a good area?
There are many places to look at. Some like to be close to the ocean and some what less expensive and close enough to drive over to the ocean. In Kitty Hawk to Nags Head the west side of the bypass is a favorite area of those that live here and don’t rent. Southern Shores, Colington, Manteo and Martins Point are some other areas that are popular. Your price range will help narrow down some areas.
Must I honor reservations made before I buy the house?
Yes, NC law says that a new owner must honor all reservations made for 180 days. If you buy in October there likely won’t be any rentals for 180 days (April), but the spring buyers will have to honor them. You, as the new owner, will get the rent money of course.
Is now a good time to buy?
Look at it this way, interest rates are crazy low and still under 5%. The rental incomes go up each year and have never gone down, on average, for years. The price that homes are selling for now is about what they sold for in 2003 and slowly going up. So it would seem that now is a very good time before prices go up and interest rates go up.
After an offer is made and accepted then what?
Next starts the Due Diligence period which will be defined in the offer. Often it is 20-40 days and is basically the inspection period. This period of time is when to get a home inspection, check insurance costs, and look into all other issues or concerns you have. During the Due Diligence period you can change your mind and walk away for any reason and get all deposits back. Once the period is over you can not.
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Joe Lamb Realty