Potential Challenges when Purchasing Waterfront Real Estate
{Part 2 of a 6-part series}
It is certainly a popular American dream, purchasing waterfront real estate then spending years looking out large picture windows at the crashing surf of the ocean or the serene calm of a beautiful inland lake.
Breakfast room in a new shingle style residence sited on a rocky promenade overlooking Long Island Sound. Designed by Charles Hilton Architects.
As I discussed in last week’s post, we are going to explore five different challenges homeowners will face when they are buying and building a waterfront home. By working with an established real estate agent in tandem with an experienced architect, the process will go more smoothly for everyone involved.
Living adjacent to the water is a naturally appealing vision for many potential buyers. Many people however who want to own a piece of waterfront real estate are caught off guard when budgeting for purchase, or when they learn of the unique risks and issues that come with owning a piece of waterfront real estate.
Waterfront real estate has always been highly valued, so securing a prime setting usually involves patience, significant financial means, and some luck. When a waterfront property is available, the sites frequently sell for two or three times (or more) the price of nearby inland real estate.
Zillow listings over $5 Million dollars in Fairfield County, Connecticut (May 2021) demonstrates that the highest value homes are most frequently found in coastal locations.
Potential buyers must be prepared to act quickly if waterfront real estate comes on the market. There are plenty of other potential buyers who are waiting for these properties to become available, so being prepared financially and emotionally is critical to a successful purchase.
Here are some things to think about if you are trying to acquire waterfront real estate.
- Financial preparation -
If you are committed to buying a waterfront property, then you need to be honest with yourself about the realistic costs. Waterfront real estate pretty much anywhere in the U.S. is not cheap, with even some most basic properties costing several million dollars. If you do not currently have the resources for this kind of purchase but are committed to living on the water, you may need a substantial loan. If so, it would be wise to be pre-approved with a lender who is familiar with you, your financial portfolio, and the specific real estate market you are purchasing into.
An excellent credit score is also a must. This may seem like basic financial information to some, but there are countless people who lose out on properties because they do not have these basic requirements in order before entering the competitive world of waterfront real estate.
- Insuring the property -
Homes that are adjacent to bodies of water subject to flooding also cost more to insure. If you are considering waterfront real estate in regions of the country that are prone to hurricanes, flooding, or other natural disasters, the cost of the insurance premiums may substantially increase your annual carrying costs.
Homes knocked off their foundations in coastal Chattam, MA after a storm in June of 2009.
Take the time to research insurance costs for the specific area where you intend to buy or call a local insurance agent and see what they can tell you.
- Know what you are buying -
Does the waterfront property you are thinking about buying actually extend to the water? It might seem like an odd question, but it is worth your time to verify that the area you think will be your private beach will actually be your private beach? There have been instances where people buy property along the ocean or a lake, only to find out that they either do not have direct water access, or that others share their access to the beach or dock. Other times construction of homes and related improvement is prohibited or extremely limited directly adjacent to the water.
Avoid this dilemma by requesting a survey of the property, having a real estate attorney conduct some research, and inquire about which local real estate agent is the most knowledgeable about the market you are interested in buying into.
Listing for new construction in Westport, Connecticut. (Waterfront views do not always equal a direct waterfront location or water access.)
- Are the house and property sympatico? -
Some beautiful houses are located on problematic property. Conversely, substandard houses are often located on awesome pieces of land. Buyers may be faced with this scenario as they consider a waterfront home.
People may tour a fantastic home, only to discover the beach they hope to use when family or friends visit is muddy and unpleasant when the tide rolls out, or too rocky to truly enjoy. Or the opposite could be true. The area near the water may be perfect, but the house needs substantial repairs or a complete renovation. In either case, you may be facing a compromise that could leave you feeling less than satisfactory about the purchase.
Blowout tide along Jersey Shore lagoon.
Also take a close look at the hood. Not every piece of waterfront real estate is in a private neighborhood where tourists and local residents are prohibited from disturbing the occupants. Look around. If there are homes that need repair or look totally out-of-place next to others, you may want to take a step back and re-evaluate the property.
An eclectic collection of architectural styles is not uncommon in many waterfront communities.
- HOAs Can Pose Additional Challenges -
In many places, waterfront real estate can be governed by a homeowner’s association. For any property owner who has had previous dealings with an HOA, experiences can range from cooperative to disastrous. HOAs are established to help preserve the value of homes in a neighborhood but can also be unreasonably restrictive and unbearable to work with.
It is in a homebuyer’s best interests to know if the home you hope to buy is governed by an HOA because you will be obligated to meet the specific requirements of that association, whether they like your plans or not. If the HOA is difficult to work with, disputes can arise regarding everything from house size and location, to view preservation, exterior paint colors, to the type of fencing that can be installed.
Part of a buyer’s due diligence is finding out whether a property is governed by an HOA, but also determining if the HOA is difficult or easy to work with. Get a copy of the association guidelines before purchasing, and ask other local residents what you might expect from the association’s regulatory board. You do not want to make a significant investment in a property and then be stuck in a place where you cannot make the kind of improvements you would like.
These are just a handful of things to consider if your goal is to purchase a piece of waterfront real estate. In our next blog post, we will review some of the regulatory considerations when planning a waterfront home.