St Petersburg At A Glance
Flood House or Flip?
Are you in the market to buy a house this spring and tempted by some of the beautifully renovated properties coming onto the market? Things may not be what they seem and you could be left holding the bag, read on.
Six months ago hurricanes Helene and Milton made landfall in our area damaging some 41,000 homes in Pinellas County alone. Since then homeowners, county and city officials have been scrambling to make
sense of the mess and move forward to repair and rebuild. There are seemingly conflicting forces in play here with homeowners looking to minimize their financial impact and officials looking to lift building standards to reduce the damage and cost of future storms.
Improving building standards requires homeowners and contractors to follow the rules on how structures should be repaired or replaced, factoring in location, and risk from flood or wind. In an ideal world all our homes would be built wind and flood proof and there’d be no need for costly flood insurance or even FEMA, and we’d all be sitting pretty. The reality is that retrofitting a home to be compliant with current building codes, or building new where a current home cannot be retrofitted is expensive. There are grants and loans to support building improvements but they are inadequate and oversubscribed, so owners of damaged homes face significant financial challenges. Additionally, insurance has shown over and over again that it’s easy to pay the premium but difficult to get the benefit when you most need it.
Pinellas County is using the term “Substantially Damaged” on any structure that is in a flood zone that is likely to have flood damage or where significant damage is reported. They are sending inspectors to those homes to do an assessment. If the inspector deems the home had extensive damage, then it is labelled “Substantially damaged” and a letter is sent to the homeowner informing them of options. The options are simple: (1) repair the home to conform with current building code, this could involve raising the home above the height of base flood elevation or (2) remove and replace the home with a new one conforming to current building standards for flood zones. You can see if a home has been deemed substantially damaged here . Some areas have been excluded so there are a lot of homes with no determination.
Both options require plan reviews and permits. Option 1 to repair the home, however, has another rule to navigate – the FEMA 50% rule. If the cost to repair is equal to or greater than 50% of the value of the building then permits will be denied and the homeowner will have to remove the structure and build new. This value includes the structure only and excludes the value of the land. The property appraiser has posted a letter on their website attached to every home showing the current assessed value of the structure and what 50% is. In many cases, especially with older homes, the value of the structure is way less than the land. The 50% rule is enforced in part by the permitting process, with cost of repairs compared to 50% of the value of the structure at time of application review. Permit applications are required to repair any damage sustained in storms including flooring, cabinetry, drywall and other interior and exterior finishes, and obviously mechanicals, electrical, plumbing and roofing.
These rules are in place to raise the level of building standards in flood zones, and make homes more resistant to future disasters. It’s worth noting that the designation of flood zones is based on the probability of flooding. There were homes not in flood zones that flooded last year, and homes in flood zones that did not flood. It’s possible that damage sustained by a home is a flood zone was not actually flood related, so we can’t make assumptions around flood zone homes.
I’ve seen several homes listed for sale recently that were clearly damaged by the storms, have been renovated and listed for sale. This is OK where the proper permitting process has been followed and renovations have been done with the oversight of the local building authorities. In these cases renovations have been done by the homeowner or contractor following current building standards and staying within the 50% rule. The issue is when there are no permits to be found. In these cases we have a home in a flood zone that has been repaired and renovated without necessarily adhering to any of the rules above.
The reasons for circumventing the permit process are obvious – homeowners trying to save money by not repairing to the expensive current standards, or flippers who bought cheap just after the storms and are now trying to make a handsome profit by doing cheaper non compliant renovations. Profits could be substantial. Most of the homes I’ve seen were bought in the $200,000s in late 2024 and are now renovated and on the market for mid $400s. None of them have any disclosures, mention of storm damage or substantial damage letters and there are no permits.
Does it matter if you buy one of these homes, after all lots of single story homes in flood zones were bought and sold before September 2024. That’s true, but that beautiful listing advertising “all new” might have been 4 feet under water just six months ago. Firstly, without permits you don’t know if the building work has been done to the required standard, or is it even safe. Secondly, what if the city knocks on your door just after you’ve moved into your new home and tells you, the new homeowner, you need to obtain permits after the fact and adhere to the 50% rule, gulp.
I don’t know the consequences here or how far the local authorities will go in catching up with these home sales that are hoping to go under the radar. All I say to clients is do your diligence, don’t make assumptions and make sure you are comfortable with any potential consequences. I will always look into a property’s past and review the findings with my clients, as well as help them understand some of these rules the cities and county have put in place. I’ve yet to work with anyone who has taken the risk, all have passed over. If you’ve been caught up in a situation like this I’d love to hear from you!
I’ve just sold a home that was deemed substantially damaged by the county. The Sellers disclosed that it had been damaged in the storms and we had the Buyer acknowledge receipt of a copy of the substantial damage letter. As ever with real estate it’s better to disclose, disclose, disclose!
If you are looking to buy or sell in the St Petersburg area, or are just looking for guidance and clarification then don’t hesitate to reach out to me here.