When will FEMA buy your damaged home?

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After Hurricane Irene pounded the East Coast last year, most affected residents began an arduous cleanup and rebuilding process to get their homes and lives back to normal.

But some flood-weary homeowners instead took the government up on a rare offer. They agreed to sell their properties to start over on safer ground. Crews will bulldoze their former homes and turn the land into permanent open space.

Since 1993, communities across the country have bought more than 20,000 damaged homes under a buyout plan funded largely by the Federal Emergency Management Agency (FEMA). The process, part of a larger grant program to lessen hazards, aims to save money. Eliminating homes in risky areas prevents future damage and cuts off the stream of flood insurance claims for those properties.

For families, it’s a chance for a fresh start.

“Now they can go buy comparable homes outside the flood zone and continue their lives,” says Lt. Robert Little, New Jersey’s state hazard mitigation officer.

How the buyout program works

FEMA provides 75 percent of the money for property buyouts and states work with local communities to fund the rest and administer the process. As a homeowner, you can’t apply directly to the government for a buyout. After a disaster, state and local officials identify where buyouts make the most sense.

A complex formula is developed to determine which properties warrant acquisition. Those that have been damaged repeatedly and are most likely to incur Mother Nature’s wrath again have the best chances of qualifying. To satisfy federal requirements, a cost benefit analysis must show that every dollar spent for a buyout will result in at least a dollar saved. To determine potential savings, officials examine the history of flood insurance claims.

Buyouts are voluntary; a homeowner can refuse the offer and stay put. Homeowners who accept the offer are paid the pre-disaster fair market value of their homes. FEMA’s website has more information on the home buyout process.

Sound like a good deal? For residents anxious to leave a flood zone, it is. But don’t count on the government coming to the rescue the next time your house is flooded.

Long waits and red tape

The buyout process is long and complex, and there’s far less funding than demand from homeowners who want to sell.

Take New Jersey, which made property acquisition a top priority to reduce flooding hazards after Hurricane Irene.

“We had requests

[from towns]

for over $400 million for buyouts, but we had only $50 million to spend,” Little says.

The state is in the process of buying out 146 homes in 14 towns. That’s a substantial number compared to previous years, but it’s still a drop in the bucket compared to the number of homes damaged by flooding.

“We had thousands of people saying, ‘I’m done. I want to go,'” Little says. State and town officials fielded countless calls from residents. “They’d ask, ‘How come my neighbor got in the program and I didn’t?'”

New Jersey officials have worked hard to streamline the process. Little says most homes designated for buyouts from Hurricane Irene will be purchased by the one-year anniversary of the storm. Usually the process takes three years.

“It’s definitely not simple,” he adds.

The waiting periods for the real estate closings are tough. Residents either find other places to live while they wait, or they fix up their homes enough to make them habitable. Any money they receive from flood insurance to fix their homes is deducted from the amount they get for the buyouts. Flood insurance does not include coverage for additional living expenses. Homeowners have to foot the bill to rent a place to live while their homes are being repaired or they’re waiting to sell.

Protect yourself with plenty of insurance

Many communities in the U.S. are at risk from natural disasters. CoreLogic’s recent Storm Surge Report found that more than four million dwellings are subject to hurricane-driven damage. The vast majority of flood victims never will be offered a buyout.

“My No. 1 piece of advice for people is to make sure they purchase flood insurance even if they’re not in the flood plain,” says Mary Goepfert, external affairs liaison for the New Jersey Office of Emergency Management. “There’s this myth they need to be in a flood plain to purchase flood insurance.”

Here are more flood insurance myths.

People outside of high-risk flood areas receive a third of disaster assistance for flooding and file more than 20 percent of flood insurance claims, according to the National Flood Insurance Program.

Little doesn’t live in a flood zone, but his house sustained thousands of dollars in damage during a heavy storm. “Since then, I bought a flood insurance policy,” he says.

A standard home insurance policy does not cover flood damage. Peter Moraga, a spokesperson for the Insurance Information Network of California, says people tend to think disasters never will happen to them and, if they do, the government will bail them out. But federal disaster aid to individuals is capped at $30,000 per person and is often in the form of low-cost loans. The FEMA buyout program is very limited.

“With an insurance policy, your payment will be almost immediately after the disaster,” Moraga says. “Within 30 days, you’ll have a check. With government assistance you will have paperwork, paperwork, paperwork, and you won’t know until you apply if you qualify.”