By BJ Oelschlegel
You’re dreaming of buying a house on Ocracoke. Where do you start?
To determine if a purchase can be a reality, most prospective buyers schedule a meeting. They come with questions, and then there are the details that these buyers are not aware of when it comes to considering the purchase of island real estate.
One of the most frequently asked questions has to do with “hurricane insurance.” The component parts of a hurricane each have their own insurance coverage. There is no one “hurricane” policy. The damage caused by hurricanes is due to rising water and strong wind. Rising water is covered by a federal flood policy; the effects of wind are covered by a very expensive and separate wind policy.
When insuring a home, you would additionally carry a fire policy and public liability. The public liability can be a rider on the policy for your primary residence.
Flood insurance is not familiar to our typical buyer since most of their homes are not in flood plains. Each of the insurance agents with whom we work offers the same federal flood policies.
The rate you pay is based on the elevation of the top of the bottom floor joist. The federal guidelines require this measurement to be at six feet above mean high water, as verified by a surveyor. For every inch above “base flood,” the rate goes down. Appliances located in the rooms under the house, have to be on platforms which are built six feet above mean high water. These under-house rooms have to have flow-through vents.
For loans, all banks will require their collateral to be insured against flooding. Cash purchases are not obligated to carry flood insurance.
Another major topic concerns “limiting factors.”
Some buyers may think it will be cheaper to buy vacant land and build from scratch. Along with inquiring about reputable contractors and the source of building supplies, buyers need to know about the process and certain considerations.
There are four general categories governing the use of a property:
(1) state and federal environmental protections of the waterfront and related wetlands; (2) The Ocracoke Development Ordinance and NC Building Code as enforced by the Hyde County building inspector; (3) subdivision covenants, and (4) Hyde County septic regulations.
The good news is that the standard state contract allows for a period of investigation called a “due-diligence period” where the specific questions regarding a parcel can be answered.
If a restriction stands in the way of a buyer’s wish for the use of the property, the purchaser can back out of the contract and have their earnest money returned.
The world of building on the island opens its own round of questions.
With prices of existing homes being lower than in the past, the one rule of thumb is to have a combined expense of buying the land and building the house not equal more than the value of a comparable ready built home. The nice thing about building your own home is that you can have exactly what you want.
The answer to the question of, “how will I pay for the property?” is a combination of providing tried-and-true banker contact information and a discussion of the pros and cons of renting. Banks want their collateral to be local; therefore lending sources need to be on the Outer Banks. Hometown banks do not want their collateral to be nine hours away.
The net income from weekly vs monthly rentals is worth investigating. Weekly rental rates are higher but come with higher expenses. Monthly rentals have fewer expenses but require the perfect tenant.
BJ Oelschlegel is a Broker with Ocracoke Lightship Realty LLC
……..before there was a lighthouse, we had a light ship to light the way for mariners.