MARKETING YOUR DISASTER-IMPACTED HOME © 2013 by Wayne D. Lewis, Sr.

14 Observations and Lessons Learned from 
Post Katrina Home Marketing

Gentilly neighborhood after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr)

It has been nearly 8 years as of this posting since Hurricane Katrina.[1]  Hurricane Katrina’s devastating impact, controversial as to whether she caused the flooding in New Orleans, will still be identified as a procuring cause for the flood that impacted at least 75% of New Orleans.

Hopefully, and I mean this with all my heart, I hope that no one will ever have to go through what we went through from Hurricane Katrina.  But my wish, as we all know, is already too late.  Our neighbors in St. John the Baptist Parish[2] (Issac, 2012)[3], our neighbors in Terrebonne Parish (Gustav, 2008 ) [4] as well as our neighbors of the northeast coast, particularly New Jersey[5] and New York[6], have already been the victims of storm surge in the form of Sandy (2012)[7] that took their homes, destroyed the Boardwalk, destroyed lives, and not to forget a host of other communities that have been affected by various disasters along the eastern and southern coasts of the United States.

 

When I see these types of destructive forces, I get flashbacks from the loss of our home in Gentilly Woods that sustained 3 ½ feet of water, but 8 feet of mold post Katrina.  I also feel a sense of forlornness for others of our family members who suffered great loss due to flooding throughout the New Orleans area.  As a Realtor®, I also shared great empathy with many of our clients, many of whom were unable to rebuild due to a lack of or inadequate insurance, or too much governmental interference, preventing them from getting back into their homes. 

Many of my clients decided to sell their homes.  However, not all of them sold their homes in the same stage of “undress”, if you will.  Some of the properties that were damaged were sold as it-literally-as is.  Some of the homes looked as though the water had just gone down after 4 months.  Wherever the water receded, that was where furniture and other personal items were left, broken, and strewn about their homes. Other homes were gutted to varying degrees.  Some were gutted to where the water stopped; some were gutted of the sheet rock, but they left some items that did not get damaged by the water, but may have had some emotional value down the road.

The bottom line is that the sale of the properties damaged by the storm revealed some important issues that I could not have advise on from prior experience.  I could not advise my clients whose homes were equally, if not more so, damaged as mine, without sharing with my clients what I too had been going through.  I had never sold storm-damaged properties, or flooded properties, or properties with water in the gas lines, or properties that were questionably sturdy, and could have fallen on top of me.  But for those who decided to sell their homes, it was still my responsibility to make sure that they got the best dollar for their homes.  What did I have to work with?  What would I have to work with if, and that’s a big IF, I ever had to sell disaster-impacted properties again?  The question before me then was, how did I prepare anyone to sell their damaged home?  It’s something that we were never trained to do.  All of a sudden, we were rookies, out of our element.    

Here are some of the lessons learned, in no set order:

1.      SAFETY-Disaster impacted homes, if they are still standing, are not all equal.  Depending on their condition before the disaster, the structure of any home is maybe subject to its pre-disaster condition.  If the property was subject to roof leaks, or was in disrepair prior to the storm, then the storm just added to the problem.  If it was unstable structurally, then it strongly advised that before entering a property, that the owners obtain a structural engineer report.[8]

Gentilly Home after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr.)

2.      Contractors- (Local or Out of Town Contractors)-Almost instantly, contractors come out of the woodwork after a bad storm or weather event.  Many, but not all, are from out of town.  As homeowners are trying to get their lives back together, contractors make promises to do whatever is necessary, pending the homeowner turn over a nice sum of money, in advance.  It is advisable that unless a homeowner has a personal contractor at the ready, they will need to access two sources for possible reliable contractors to work on their homes:

a.                               The Better Business Bureau [9]- should already be on speed dial.  After Katrina, a lot of Contractors got a bad rap because of other contractors.  Even if you haven’t decided to sell your home, it would help you, as a homeowner, to avoid signing up the first person who presents themselves as a contractor.  Reason:  If the contractor doesn’t pay their bills to their vendors, that may leave lien on your home when you do decide to sell it.

b.                              Contractors Association [10]- The Louisiana State Licensing Board of Contractors provides up-to-date information on those contractors who are properly insured and certified to provide proper service to customers.

3.      Insurance Claims- (Flood Claims, Homeowners coverage, Wind Damage)- If the homeowner has his/her policies, it would be incumbent on them to contact their agent/agency as quickly as possible.  Their agent will have special instructions to follow that may include taking pictures, meeting with a claims adjuster, or insuring that the property is protected from any further damage (cover the roof,  or secure the house itself against further damage, theft, or vandalism.  It is important for the homeowner to place their claim number in a safe place.

4.      FEMA-Federal Emergency Management Agency[11]-FEMA has many obligations prior to, during and after a major disaster.  After Hurricane Katrina they coordinated the placement of 1000’s of mobile trailers that were (un)affectionately called FEMA trailers.[12] They provided an initial stipend to residents who had lost their homes either due wind damage or flooding.  They also provided tarps to help keep homes from further damage from rain and roof leaks.

Pine Village homes after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr.)

5.      American Red Cross[13] - The American Red Cross provided needed meals, clothing and first aid care.  They also provided vouchers for those who needed a place to stay (including hotels and rental properties).  This maybe a good time to mention that all attention should be paid to being safe.  Do not go into areas that have not been declared safe.  Electrical wires could still be hot, water on roads maybe covering up open manholes, or washed out roads altogether.  BE SAFE!

6.       What to consider to do with your disaster-impacted home? Here are some options:

a.                               Gut the home out and leave it as is, pending insurance resolution;

b.                              Gut it out and repair with Insurance proceeds;

c.                               Leave as is (damaged) and sell it to the highest bidder

                                                              i.        be aware of the need to maintain your damaged home by boarding up and cutting                                          the grass; Avoid city code violations;

                                                            ii.         if there is a pool, be sure to drain and/or cover it to avoid injuries and mosquitoes;

d.                              Renovate and keep it

7.      The Decision to Sell-

Gentilly Home flooded after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr.)

The above options can’t necessarily be made in a vacuum.  Given whatever set of circumstances the homeowner is facing, the decision to keep or sell their home needs to be made based on costs.  This in no way suggests disregard to the feedback of family, but the homeowner’s name is in play.  The cost factor could include the cost to rebuild and maintain a home that is likely to be impacted again in the future by a similar set of circumstances as occurred as a result of Katrina.  One of the subsequent costs to be evaluated too, is increased insurance coverage.

8. What should the homeowner be aware of if they decide to sell their disaster –impacted home?  
1. Any outstanding taxes-At what point can the taxes be reduced on the home since the damage on the home;
2. Insurance should be changed from homeowners to a lower risk policy, possibly a builder’s risk policy [14] (consult your insurance provider). This policy may be sufficient if the house is damaged and is not inhabitable;

9. How much do I sell my disaster-impacted home for?  Or, how much is my disaster impacted home worth?

The decision to sell your home after a disaster will be hard enough, but then to come to the realization that it maybe worth far less than it was only days or months ago, will be another challenge for the human spirit.  This is where a licensed Realtor will need to come into play.  It is still recommended that you interview agents to see what perspective and experience they may have with such devastation.  It should not be a determining factor that an agent has or is suffering from the same disaster in order to prove qualified to sell your home.  Experience however, is still extremely important.

Home flooded to 2nd floor in Violet, LA after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr)

10. Whomever you choose will as your agent, they will now need to gather comps.  Suffice it to say, that if your home suffered any level of loss close to or equal to the flooding in New Orleans post Katrina, there maybe a shortage of reasonable comps.  The one problem that became an issue during the aftermath was, what was selling, and how close to the seller’s home that that those homes could be used as a comparable home?  Who else was pricing their homes?  What made sense?  What we learned was that despite the fact that a home was damaged, it still had functionality as long as it had 4 walls, and a replaceable roof, not to mention a sturdy foundation.  So it wasn’t a matter of a structure on a lot, where in some cases properties may have sold for lot value, there were other factors that had to be taken into account as well. 

11. Location

Even after Hurricane Katrina, where 1000’s of homes flooded, all over the city, location, location, location was still apparent.  A home in Gentilly still could not be compared to a home that flooded in Lakeview. Nor could a home along Chef Menteur Hwy. and Read Blvd. be compared to a home at Caffin Ave. and Royal St., despite any physical similarities to the contrary.  Despite apparent similarities, the water had not changed the dynamics of the overall location of properties in New Orleans.

Algiers Church after Hurricane Katrina
 (Photo by Wayne D. Lewis, Sr)

12. Financing Challenges

Immediately after a major flooding event, homes will be very difficult to finance.  Many banks and loan companies may not take a chance on homes that were damaged on a large scale.  So, unless a home sells for cash, and it most likely will, then financing will be awhile before it becomes the norm.  Depending on where you are in the decision to sell your home, and if no one else has sold their home in your designated area, you may have to throw a price out there.  If it sells too fast, then you know you may have priced it too low.  If your home sells after 6 or more months, then adjusting the price would be strongly advised throughout the time period and going forward.

13. Pricing, selling and insurance

If insurance has been collected on the house, and your intent is still to sell (consult with your attorney, CPA, or Insurance provider on how that works), the pricing will be a matter of a small profit, all other things considered.  However, it may not matter whether you have collected insurance in the pricing of the property.  But buyers will want to know if you received insurance on your damaged home.  Buyers may want the money that you collected from the insurance company for which they are looking to repair the home.  You may have to negotiate the proceeds of the sale including any insurance that your received, or any other grants that you, as a seller, may have received since the damage to the home

Pricing is relevant here because you may want to sell the house at a price that includes the cost of selling your home in the condition that it is in, even if you received insurance for your loss.  Pricing is extremely important on a disaster impacted home because it can backfire.

East Lake Plaza after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr)

In order to avoid pricing backfire, especially in the absence of viable comps, it maybe best to wait until other homes are on the market in your area.  Putting your home on the market too early after a disaster may result in a greater loss, that can’t be recovered once the property is sold.  If you are among the sellers who rush to sell their homes right after a disaster, you can expect to take a greater hit.  Therefore, it is strongly suggested that you, as a seller, wait 3 to 6 months before putting your home on the market.  After that amount of time, you should have several sales to use as a means of pricing your damaged home.

14. Minimal Repairs

Earlier we talked about gutting a home.  This will be a very important decision in the decision to sell the home.  A home that is gutted could be the difference of approximately $10-20,000, depending on other factors.  Generally, for the cost of a good gut job, $1000-$2500[15], could earn an additional money on the home.  For example, be sure to get a tarp from FEMA to reduce, any further damage to your home in the event of roof damage.  Board up the home to prevent, as much as possible, any vandalism.  Cut the grass and remove any post flooding debris in the yard.  These are seemingly insignificant acts, but they could make a difference when you, as a seller, decide to sell your home.

Home in Gentilly flooded after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr.)

In conclusion-

As I said earlier, I hope that no one, from this point forward, ever have to face what I, my family, and clients have had to witnessed in terms of the disaster we have seen.  But we know the probability is very low of that never happening.  But the best way to be prepared is to get the appropriate insurances.  With respect to flooding, homeowners coverage, or Builder’s Risk, see your insurance provider.  If your home is damaged, be sure to take reasonable precautions to protect your family and you from injury by listening to all public broadcasts, by not venturing into areas not deemed to be safe.  If you decide to have your repaired, be sure to check with the Better Business Bureau, or the Louisiana State Licensing Board for Contractors.  If you decide to sell your home, you may want to wait until there are a sufficient number of homes on the market, or that have sold in order to get the most that you can for your home, but be sure to check with your Realtor. If you need to locate a Realtor, contact the New Orleans Metropolitan Association of Realtors[16], or the Louisiana Real Estate Commission [17] for licensed real estate professionals.  Just be aware that the amount of insurance you may receive on your disaster-impacted home maybe a point of contention when selling your home, so be prepared. Finally, know that we have not covered every possible set of circumstances here, and could never do so in this small a forum.  As always, consult with your respective professionals for a possible course of action to be considered, including but not limited to your Realtor, your insurance provider, your CPA, your medical professional, and/or your attorney, where necessary. 

9th Ward home after Hurricane Katrina
(Photo by Wayne D. Lewis, Sr)

Disclaimer: Information provided here while deemed be from reliable sources, is not guaranteed.  Information here is not intended to solicit the business of any broker or agent.

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[1] Hurricane Katrina- http://hurricanekatrina.com/

[2] St. John the Baptist Parish- http://www.sjbparish.com/

[3] Hurricane Issac-  http://www.forbes.com/sites/weatherbell/2012/08/26/tropical-storm-isaac-should-rival-hurricane-katrina/

[4] Hurricane Gustav- http://www.nasa.gov/mission_pages/hurricanes/archives/2008/h2008_gustav.html

[5] New Jersey and Hurricane Sandy- http://news.yahoo.com/hurricane-sandy-1-700-event-182934012.html;_ylt=A2KJ2UYI0_NRsQYAdEjQtDMD

[6] New York and Hurricane Issac- http://finance.yahoo.com/news/fear-flooding-hurricane-sandy-still-140000510.html;_ylt=A2KJ2UaP0_NR2yQAnfPQtDMD

[7] Hurricane Sandy-  http://www.huffingtonpost.com/news/hurricane-sandy-2012

[8] Structural Engineer’s Report-  http://www.bedrockfoundation.com/foundation-engineers-report-dallas-tx.html

[9]  Better Business Bureau (BBB)- http://www.bbb.org/

[10] Louisiana State Licensing Board of Contractors- www.lslbc.louisiana.gov

[11] FEMA- http://www.fema.gov/disaster-survivor-assistance  

[12] FEMA Trailers-  http://www.fema.gov/news-release/2007/11/08/myths-facts-travel-trailers

[13] American Red Cross- http://www.redcross.org/

[14] Builder’s Risk Insurance -  http://en.wikipedia.org/wiki/Builder%27s_risk_insurance

[15] Gut prices are based on the amount charged after Hurricane Katrina.  Your circumstances may vary.  You may pay more or less depending on location, urgency, and the amount to be removed from the home.

[16] New Orleans Metropolitan Association of Realtors-  http://www.nomar.org/

[17] Louisiana Real Estate Commission- http://www.lrec.state.la.us/home

Do Disaster-Impacted Homes Recover Value? © 2012 by Wayne D. Lewis, Sr.

 

 

For many along the Gulf Coast, hurricanes, tornadoes and floods are a way of life. For as far back as record history, the Gulf Coast has experienced any number of severe hurricanes, often bringing surges and torrential rains that either damage totally, or completely wipe out towns, and communities. But, for reasons that aren’t always clear, people return to those areas, the same way people return to areas affected by tornadoes in the Mid-west, or fires in California and surrounding states. People eventually rebuild.

But even as people rebuild, they eventually sell their homes. The question is, for how much are they able to sell their homes? Are they able to make over and above what they purchased it? Or, are homeowners forced to accept far less than they would have ordinarily received had their homes not been burned to the ground, washed off of its foundation, and flooded to the rafters or by any other means by which nature makes her tremendous impact on our various communities? The absolute answer would require a full scaled study. I don’t anticipate doing one here. But I will take a look at 3 communities around the New Orleans area. I will take three communities, for which I will only look at and compare their current values, their values just prior to Hurricane Katrina to see if these properties have recovered their pre-storm value.

The areas that I have selected are:

· Gentilly (area 76)

· Lakeview (area 69)

· Mid-City (area 68)

These areas all suffered flooding as a result of the aftermath of Katrina, in other words, the flood walls either gave way, or were breached, but I will not get into that discussion. We are discussing how these properties may have or may have not recovered since 2005. Here are the specifics that I will be looking at just to get a snapshot of how these properties have faired, looking at them in average sales:

# of properties; 3 bedrooms; 2 baths; sq ft of living area; $ per sq ft; Days on Market (DOM)

I am going to be looking at the 2^nd quarter of 2005 and comparing it to the same quarter of the year 2008 and our current year, 2012. While other factors may have affected the values from either a local or national perspective, those factors, for the purpose of this investigation will be taken off of the table. What we are looking for is the optimum dollar per square foot that a house is selling for now, in hopes that that home is now worth as much now, if not more than before Hurricane Katrina. Your results may vary. Here is what we learned (See Table below):

 

Years/ Areas of New Orleans	2nd Quarter of Respective Years
	Y2005			Y2008			Y2012
	Mid City (68)	Lakeview (69)	Gentilly (76)	Mid City	Lakeview	Gentilly	Mid City	Lakeview	Gentilly
Avg Sq Ft	1698	2326	1623	1763	2667	1395	1633	2125	1542
Bdrms 3>	3	3	3	3	3	3	3	3	3
Baths 2	2	2	2	2	2	2	2	2	2
DOM	50	55	42	166	149	88	73	25	94
$perSQFT	$     112.51	$      142.43	$      93.39	$ 186.21	$  109.09	$   87.35	$   96.76	$ 153.47	$   76.28
Total # of Prps	50	55	34	11	9	16	21	9	17

 
Sources: http://nom.mlxchange.com; http://www.gsrein.com 

Mid City

As we look at the above table, we can see that in the 2nd Quarter of 2005, prior to Hurricane Katrina, 50 single family homes sold in Mid City.  They were selling then at $112.51 per sq ft.  After Hurricane Katrina, in 2008, for the 2nd Quarter, the average $per Sq Ft. increased by 60% to $186.21.  By the 2^nd Quarter of this year, 2012, Mid City homes sales of 3 bedrooms 2 baths, accounted for decrease from the 2^nd Quarter of 2008 to $96.76, or a 52%  reduction.  Compared to 2005, before Hurricane Katrina, where homes were at $112.51 $ per sq ft, the 2012  amount is down by 14% from 2005 in Mid City (Area 68).

Lakeview

As we look at the table above, the area of Lakeview, in 2005, average sales for a 3 bedroom 2 bath single home was at $142.43 per sq ft. in its 2^nd Quarter. We had 55 singled-family homes that sold at this rate.  By 2008, the 2^nd Quarter, we had 9 properties that sold $109.09 per sq. ft.  This accounted for a 76% difference from the sales of 2005’s second quarter in $per sq. ft.  In 2012, we still had 9 single-family, 3 bedroom homes that sold in the 2^nd Quarter at $153.47 per sq. ft.  2012 represented more than a 70% increase in those quality of homes from 2008.  Additionally, we see that an 8% increase occurred in the Lakeview area (69) in from 2008 to 2012, which suggests that while the dollar per square foot dropped to $109.09 for the first 3 years, that Lakeview seems to have excelled since pre-Katrina.

 

Gentilly

The Gentilly area (76) of single-family homes 3 bedrooms 2 baths for 2012, 2^nd Quarter ended at $76.28 per square foot sold.  This represented a 33% decrease from the same quarter in 2005, pre-Katrina at $93.39 per square foot.  2008’s 2^nd Quarter  per dollar square foot at $87.35 comparatively speaking, was a 19% plus in their dollar per square foot compared to 2012’s 2nd Quarter decrease in the Gentilly area, that was at $76.28 per square foot.

Summary

This summary looked at the sale of homes in 3 selected areas of New Orleans proper that were reported to have flooded or were severely damaged from Hurricane Katrina or its aftermath.  What we see in the explanations above, including the table, is that there is a  possibility that the disaster of over 7 years ago, may have had an impact.  While there were and still are external factors that affect housing values in not only these areas, but the entire New Orleans area, the disaster did appear to have some type of affect in 2008, three years after the storm in all three areas, and not all bad.
What we want to notice about this non-scientific study is that there were some areas that were impacted by the summer disaster of 2005 that appeared to have suffered in dollar per square foot.  Whether it was directly related to Hurricane Katrina is not conclusive, but we want to see if those properties that were impacted similarly, have recovered their pre-Katrina value.

According to the table above, the Gentilly area continued to decrease in dollar per square foot dropping from $93.39 per sq ft in 2005’s  2^nd Quarter to $87.35 per square foot in 2008’s 2^nd Quarter, and hopefully, bottomed out in the 2^nd Quarter of 2012 at $76.28.  You may want to check with your Realtor to determine the most recent status of sales in your area. 

Although the Mid City area stepped up in the 2^nd Quarter of 2008 when it saw a 40% increase 3 years after the storm from  its pre-storm value of $112.51 per sq. ft. to $186 per sq. ft., it fell back to $96.76 per square ft., loosing $15.75 per square foot or 14% of it’s pre-storm value in 2012’s 2^nd quarter.  The only good news, as it relates to our study, is that the Lakeview area showed a total rebound from the 2^nd Quarter of 2005, pre-Katrina from $142.43 per sq ft. to $153.47 per sq. ft. an 8% improvement for the 2^nd Quarter of 2012.  This was able to be accomplished despite the fact that Lakeview suffered short term loss of value for the 2^nd Quarter for 2008 at $109.09.

 

Conclusively, the areas of Gentilly, Mid City and Lakeview had their struggles over the past 7 years since Hurricane Katrina.  While this study used Hurricane Katrina as a measuring stick in terms of time reference, and the fact that many of the properties in the affected areas were likely impacted by the storm, it should not be concluded that the storm actually damaged the properties included in this study.  But it is safe to say, that the homes that are used in this study were likely to have been impacted by virtue of flooding, wind damage, or any other hurricane related activity that was in proximity to these subject locations. 

 

This has been an opinion of factors related to Hurricane Katrina and sales in the New Orleans area. Your results may vary.  You are advised to consult with your Realtor or Appraiser for more up-to-date information.