Extreme Weather Events and the Value of Your Home — As Your Insurer Sees It

November 4, 2022
Regardless of where your home is located, your house may suffer extreme weather conditions.
Take the heat dome that seemed to descend over us over the summer months along with wildfires, floods, unexpected hurricanes and torrential rains. Winter brings no relief with unseasonable cold temperatures. Often once in a century events happen repeatedly with torrents floods, wild fires and raging winds. Things have gotten so bad that across the United States and Canada, communities deploy a variety of strategies ranging from cooling centers to resilience hubs, which are established as community initiatives to build in each community a well-built and well-stocked structure specifically designed to withstand the kind of climate disaster that has become an almost daily event across the world.

If cities are allocating serious funds and appointing disaster managers, it would be well to assess the dangers to you personally, given that your house is not only among your most important assets. Your loved ones are assets above all price and valuation, but your home regrettably is now being valued and revalued. Look at your house the way a professional appraiser does in an era of climate change.
Global Warming as a Homebuyer’s Nightmare

Raging wildfires cropping up in unexpected places, tornadoes setting down where they had never set down before, and flooding after torrential rains simply had not played a significant role in housing transactions—until now. All that changed dramatically with climate change, though few are aware of it. Lenders, insurance companies and appraisers are crunching numbers and see an increase of violent storms, wildfires, floods, droughts and extreme heat from a perspective of valuation, as they have to, because these affect property values and maintenance costs in a dramatic way.

Water damage can be costly and difficult to repair, sometimes compromising the very foundation of your house. Roof, siding and windows are prone to damage from high winds. Flooding and wildfires have destroyed entire communities on the West Coast of late. Know your risk before buying. A lack of knowledge about climate risk makes it difficult for buyers to recognize that their home could be more costly to maintain, more expensive to insure, and more exposed to damage and possible destruction from a storm or fire than you had ever imagined in your calculations.

Most assuredly your agent has looked at FEMA maps for flooding danger, which may be why you may not be able to have flood insurance at all from private sources. That means that property overlooking water, however magnificent now in value, may become worthless in a day. There is evidence that found that less than 10 percent of buyers know that a house is in a flood plain before they make an offer. Researchers have even found that homes with a high risk for flooding sold for a premium of 13.6 percent more than homes with a low risk for flooding during the first quarter of 2021, an increase substantially greater than in any other year.

Banks as underwriters worry that climate change with its increase of mortgage default rates, will reduce house prices in areas prone to crisis, thereby producing climate-related patterns in sales, as people choose to move away from areas with high risks from fires, floods and storms, leaving behind less desirable communities lowering property values in a dramatic way.

Sellers are not always required to share information about risks associated with natural disasters or previous damage. You need to do your own knocking on doors and online research. Home buyers can now look up flood risk and climate scores, on sites such as Redfin and Realtor.com to establish risk from floods, fires and storms. Much depends on it.
Extreme Weather Conditions and Your Home — Be prepared

Predicting insurance costs based on climate risk is quickly becoming part of the mortgage process because it’s part of the cost of ownership which is extremely hard to establish in an era of astonishing weather due to climate change. Don’t be a victim. These are steps you can take that will reduce loss and even add value to a property.

Think ahead. You will surely have colder winters and warmer summers often reaching crisis levels. That calls for thinking through your air conditioning system in summer, and for winterizing your home with special attention to insulation and protective windows. You should be able to provide potential clients energy ratings that show how well your windows keep out air, water or wind and figures for thermal resistance of your insulating material, particularly under your roof. Your roof itself is a special problem, given the damage that once-in-a century rain or wind can wreak upon it. Your drainage should be among the most important factors in any renovation and acclimatization plans.

The crisis is bringing new technologies on the market that should impress appraisals and buyers. We now have something called “cool roof technology” which are specially designed roofing materials and coatings with high solar reflectance and thermal emittance to shield you from the sun’s rays. Where flooding is a special problem, you should install a check valve to protect against sewer backups, an effective sump pumps, even bags of sand to limit the damage. After an episode of crazy weather, immediately inspect the condition of your home’s exterior, fixing any damage , even minor ones to prevent it from worsening the next time extreme weather conditions should strike.

There is a new generation of products and services that will need innovative engineering, such as creating resilience hubs in each community. We aim to be at the forefront of that revolution in climate change engineering. New products to crisis-proof your home are on the way.
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