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Real Estate Investors Rush To Buy Houston Homes Damaged By Flooding

Nov 8, 2017
Originally published on November 10, 2017 3:42 pm

More than two months since Hurricane Harvey made landfall in Texas and historic flooding damaged tens of thousands of houses in the Houston area, many homeowners who got hit are in a bind. Their now-gutted homes are financial drains.

That's bringing out investors who are eager to pick up damaged houses at low prices.

Call it a post-Harvey frenzy for flooded homes.

Corey Boyer, an investor based in Cypress, Texas, has been putting in more than a handful of offers – many site unseen.

"I've seen plenty of flood houses at this point, so I had a pretty good idea what we were walking into," he says before unlocking a gate outside a rose-brick rambler in Humble, Texas, just north of Houston.

Inside, water dripping from an exposed bathroom pipe echoes through this skeleton of a home. The water-soaked insulation and drywall have been ripped out. What used to be the kitchen and living room is now mostly just wooden studs and copper wiring.

"As unfortunate as this situation is, this is one of the best situations for somebody like myself because you see everything," he explains.

For a house that could have been worth as much as $350,000 before Harvey, Boyer says he has it under contract at $135,000 and estimates it needs at least $60,000 in repairs. He wants to make sure this flooded home can come back to life and become marketable again.

But the risk is how long it will take to find a new buyer once it's fixed up. Will anyone want to live in a neighborhood that flooded after Harvey?

Boyer is betting they will — as long as the price is right. Plenty of other investors are also taking the gamble, combing through neighborhoods in and around what was already one of the hottest real estate markets in the U.S.

Flooded homeowners, Boyer says, can benefit from his business plan too.

"This isn't something that they're being feasted upon by vultures," he says. "They don't have an easy out. They're facing one bad decision or another really tough decision."

About four out of five homes damaged by flooding from Harvey were not covered by flood insurance, according to an estimate by the Consumer Federation of America. Many homeowners who did buy insurance are still waiting for their insurance checks while still paying for utilities, taxes and a mortgage — all for an inhabitable house.

For Jimmie Sue Mayes, selling her flooded home is a matter of safety. She and her husband own a mid-century rancher in Houston's Meyerland neighborhood, parts of which have flooded three times in the past three years. As the water rose in their one-story home in August, they escaped with their three young children to a neighbor's second floor across the cul-de-sac.

"Rebuilding is not an option for us because it was really like grab our kids and go," Mayes says. "It was really, really scary."

Mayes says she and her husband can't afford to elevate the house. Instead, they hope that selling their home for essentially the value of the land will help pay off their mortgage.

Still, she says there's another cost of selling — a disappearing neighborhood.

"It's already a ghost town," says Cynthia Buckley, who sheltered Mayes' family on her second floor while they waited for rescue. "We already don't feel safe here, especially on the weekends or after dark."

Buckley's first floor was flooded after Harvey, but she says her family's decided to rebuild. She's worried, though, that neighbors who have left their flooded homes won't be returning.

"Most of us here in the cul-de-sac, you know, wanted to stay," she says. "But this last flood was a game changer."

That's why real estate investors like Eddie Gant say they're preparing for a housing turnover in the Houston area that could last for a couple years.

"We're still in the what I call the embryo stage of what's going on," says Gant, who owns Advantage House Buyers, part of the franchise known for their slogan "We Buy Ugly Houses."

He says the next wave of sellers may include owners of homes that were under water in more ways than one.

"That's where it's going to get a little hairy around here and maybe a little ugly," he adds. Many homeowners who owe a lot of money on their homes, he believes, will just walk away from them.

Copyright 2017 NPR. To see more, visit http://www.npr.org/.

ROBERT SIEGEL, HOST:

We're going to get a look now at the real estate calculations being made in the Houston area these days. Many homeowners who got hit with severe flooding are in a bind. They're now-gutted homes have become financial drains, and that's bringing out investors who are eager to pick up damaged houses at low prices. NPR's Hansi Lo Wang reports.

HANSI LO WANG, BYLINE: Call it a post-Harvey frenzy for flooded homes. Corey Boyer has been putting in a lot of offers since the hurricane and flooding damaged tens of thousands of houses.

Site unseen...

COREY BOYER: Yeah, I've seen plenty of flood houses at this point. So I had a pretty good idea of what we were walking into.

(SOUNDBITE OF GATE UNLOCKING)

WANG: He unlocks a gate outside a rose-brick rambler in Humble, Texas, just north of Houston.

(SOUNDBITE OF WATER DRIPPING)

WANG: And inside, water dripping from an exposed bathroom pipe echoes through this skeleton of a home. The water-soaked insulation and drywall has been ripped out. What used to be the kitchen and living room is now mostly just wooden studs and copper wiring.

BOYER: As unfortunate as the situation is, this is one of the best situations for somebody like myself because you see everything.

WANG: And Boyer wants to make sure this flooded home can come back to life and become marketable again. He says before Harvey, this house was probably worth around $350,000.

How much are you buying it for?

BOYER: I've got it under contract at 135, but it's probably going to need $60,000 to $70,000 worth of repairs.

WANG: The risk is how long it will take to find a new buyer once it's fixed up. Will anyone want to live in a neighborhood that flooded after Harvey? Boyer is betting they will as long as the price is right. And so are plenty of other investors who have been combing through neighborhoods in and around what was already one of the country's hottest real estate markets. Boyer says flooded homeowners can benefit from his business plan, too.

BOYER: This isn't something that they're being feasted upon by vultures. They don't have an easy out. They're facing one bad decision or another really tough decision.

WANG: In the Houston area, an estimated 4 out of 5 homes were not covered by flood insurance before Harvey. And many who did buy insurance are still waiting for their insurance checks while still paying for utilities, taxes and a mortgage all for a house that you can't live in. For Jimmie Sue Mayes, selling her home was a matter of safety.

JIMMIE SUE MAYES: We probably should have taken all of this Sheetrock out, but the house is going to have to be demoed anyway.

WANG: The flood water went as high as 4 feet in some parts of her mid-century rancher. It's in Houston's Meyerland neighborhood, parts of which have flooded three times in the past three years.

MAYES: Rebuilding is not an option for us because it was really, like, grab our kids and go, you know? It was really, really scary.

WANG: Mayes says she and her husband hope that selling their home for essentially the value of their land will help pay off their mortgage. Still, Mayes says there's another cost of selling - a disappearing neighborhood.

CYNTHIA BUCKLEY: It's already a ghost town. You know, we already don't feel safe here, especially on the weekends or after dark.

WANG: Cynthia Buckley owns the home across the street, and her first floor was flooded after Harvey. But she says her family's decided to rebuild. She's worried, though, that neighbors who have left their flooded homes won't be returning.

BUCKLEY: Most of us here in the cul-de-sac, you know, wanted to stay. But this last flood was a game changer.

WANG: That's why real estate investors like Eddie Gant say they're preparing for a housing turnover in the Houston area that could last for a couple of years. Gant owns Advantage House Buyers. It's part of the franchise known for their slogan, we buy ugly houses. And he says the next wave of sellers may include owners of homes that were under water in more ways than one.

EDDIE GANT: That's where it's going to get a little hairy around here and maybe a little ugly. I think you're going to see a lot of homeowners in that situation walk away.

WANG: And that's when you'll see more real estate speculators coming in. Hansi Lo Wang, NPR News, Houston. Transcript provided by NPR, Copyright NPR.