Beware of the risks involved with buying oceanfront property
This article talks about some of the risks involved with buying beachfront property in Delaware.
Owning a vacation home located right on the beach sounds idyllic to a lot of people. With so much beautiful coastline in Delaware, it is hardly surprising that the state is a top destination for beachfront property buyers. As WTOP News reports, the oceanfront real estate market has rebounded from the 2008 Financial Crisis and demand is quickly outpacing supply. As a result, the cost of beachfront properties is climbing and there is pressure on buyers to snap up an available property quickly. However, it is important to realize that beachfront properties are unique and entail a number of different risks.
Watch out for insurance
The Delaware coast is vulnerable to hurricanes and Nor’easters, and that means that flood insurance is often a big expense for beachfront property owners. As the Delaware Department of Insurance points out, standard homeowners insurance policies will typically not include flood insurance, which is a fact that many prospective buyers are often surprised to learn about. The cost of flood insurance can run into the thousands of dollars for some properties.
Furthermore, learning after the fact that a desired property is in a flood zone will not typically be good enough reason to get out of a property contract. Those who are not purchasing their property with a mortgage are also not required to buy flood insurance. As a result, people could find themselves locked into buying a flood-prone property if they don’t assess the risks beforehand.
Expect more documentation
A beachfront property is a luxury item and banks and other lenders are much more careful about who gets approved for financing for such properties than they were before the Financial Crisis. As a result, buyers should expect potential lenders to demand a lot of documentation proving that they are able to afford their desired property.
Unusual risks for beachfront properties
A number of beachfront properties in Delaware are located on ground leases. A ground lease essentially means that the land underneath the home is not actually owned by the homeowner; rather, it is rented. Land lease fees can be very high and such properties usually include restrictions on what the homeowner can and cannot do to the property.
Furthermore, many beachfront properties are condos. Condo agreements can be very complex and may include substantial fees.
Talking to an attorney
Because of the potential for so many unwanted surprises when buying a beachfront property, it is important for prospective buyers to talk to a real estate attorney. An experienced attorney can advise buyers throughout the real estate transaction process, including by helping them get the necessary documents in order and notifying them of any potential risks.