Chuck Poteet couldn’t believe his eyes. Wading closer to the real estate office he’d spent the last 17 years growing, he could see that the building was sitting in chest-deep water. Poteet had parked a mile away and waded in, accompanied by the owner of a nearby restaurant who had suffered the same plight.
Poteet wasn’t alone, nor was that real estate office his only pressing problem at the time. It was August 2017, and Hurricane Harvey had left a path of destruction across Southeast Texas that caused more than 100 deaths and an estimated $125 billion in damage.
This Wasn’t in the Plan
A few months before Harvey hit, Poteet had purchased a new franchise from HomeSmart and was now the broker/owner of Houston-based HomeSmart Fine Properties. “We were going to use the Labor Day weekend to fine-tune all of our announcements and raise a new flag for HomeSmart in Houston as a new franchise owner,” Poteet says.
Hurricane Harvey changed all of that, starting with about two feet of water on the street where Poteet lived. “We spent the night rescuing other families that were getting flooded, triaging them at our home because we had a garage apartment, and we were on higher ground,” he recalls. “It was about everyone jumping in and helping one another.”
The rising waters eventually forced an entire neighborhood evacuation. “We waded out in chest-deep water,” says Poteet, who knew from the TV news that his real estate office was also in peril. In total, he and his family lost their home, the office, and three cars.
Next came the cleanup, salvage, and restoration process. One immediate roadblock for the Poteets was a lack of flood insurance.
“I knew better, but we’d dropped our flood insurance because my wife had breast cancer … and we were grappling with high medical expenses at the time,” says Poteet. “We had to save money somewhere, and I knew if we ever got flooded it would be a FEMA catastrophe.”
That’s exactly what Hurricane Harvey turned out to be, but FEMA disaster relief was capped at about $33,000—not enough to rebuild a home or business—and getting that relief took time and mounds of paperwork.
The challenges didn’t end there. Poteet had 12 active listings that were completely flooded and five pending deals wiped out by the storm. Five of his agents experienced flooding catastrophes of their own, and two of them lost their homes.
Poteet feels fortunate that at least no one from his family or business was injured during the storm. He also was encouraged by the way his friends, colleagues, and fellow REALTORS® rallied to preserve and rebuild.
As for what he learned from his Harvey experience, Poteet says, “The scout master kicks in.” He recommends having a “go bag” prepared that includes all documents and financial records that you need, as well as important medications. He also says it’s helpful to try to be mentally prepared for the aftermath—for the possibility of having to let go of properties and possessions. “You can’t let it eat you up,” says Poteet. “When the excavators showed up and started grabbing our furniture, pictures, and clothing and putting it in dump trucks, that was our ‘letting go.’”
It Pays to Plan Ahead
Since 1980, the U.S. has sustained 241 weather and climate disasters where damages reached at least $1 billion, according to the World Economic Forum. In 2018 alone, 14 separate billion-dollar disaster events hit areas in the U.S.
But it doesn’t take a billion-dollar disaster to harm a real estate business. In fact, a smaller flood, localized fire, tornado, cyberattack, or other event can take a serious financial and operational toll on a company—and its owner’s and agents’ livelihoods. It may be human nature to put off preparations because nothing has happened yet, but waiting until a disaster threatens may be too late to effectively prepare.
There are steps that real estate professionals can take now to help mitigate the negative impacts of any catastrophic event.
Alexis Wilkins, a sales manager at AmCap Insurance’s New Orleans location, says real estate professionals not only have to think about themselves but also their clients when preparing for, dealing with, and recovering from such events. “An approaching storm can impact a buyer’s ability to secure insurance coverage, and can delay closings,” says Wilkins. “Also, flood insurance coverage requires a 30-day wait (unless it’s for a pending closing), so it’s not something you can go out and get when a storm is coming.”
Wilkins says real estate brokers and agents should maintain good contact information for one another—and for their buyers and sellers—in case you need to communicate with them outside of the office and without the company’s computers. “Also have your insurance policy details, numbers, and providers’ contact information handy, so that you can report claims when the storm or other event has passed.”
For agents and brokers who want to prepare before disasters strike, Wilkins points to NOAA’s Hurricane Preparedness page and the Insurance Institute for Business & Home Safety’s disastersafety.org site as two good resources. You can find advice to assemble a basic disaster supplies list, instructions on developing plans by specific risk, and resources for how to recover from a disaster.
How Quickly Can You Get Going Again?
Cate Steane, president at Make it Happen Preparedness Services, says those real estate companies that take steps in advance to protect their people and business investments will be able to reopen faster and serve their clients and their communities. “Protecting your people means providing them with emergency preparedness training and ensuring that they have a family emergency plan,” Steane explains. “A good approach is to offer an emergency supplies kit to any employee who brings in a completed family emergency plan.”
Steane says brokers should also be sure that they have insurance coverage for the types of disasters that occur in their areas. Some events, like flooding, are not covered by standard business policies and need to be purchased separately. Anyone who is renting his or her real estate office—and who thinks that its contents are not worth the considerable cost of flood insurance—should remember these two things:
- High premiums reflect the fact that actuaries have assessed an area and determined it has a high risk. “Expensive insurance means that people who study this for a living think it is likely that you will suffer this loss,” says Steane, who points to the Red Cross Ready Rating site as a good disaster preparedness resource for businesses.
- While it’s helpful to have coverage for your office contents and tenant improvements, Steane considers business interruption insurance, or BII, the most important coverage for a company during a flood or other disaster. “This coverage will make the biggest difference in your company’s ability to recover after a disaster, because it replaces your lost income and pays the cost of renting and furnishing alternative space while you are displaced,” she says.
According to FEMA, 90% of small companies that do not resume operations within five days after a disaster fail within a year. While it’s not clear if that statistic directly applies to real estate firms, Steane says real estate professionals should place an urgency on recovering quickly to resume business operations. “If you have the right insurance coverages, cash reserves, and have pre-documented your claims, you can gain the competitive advantage of being the first in your industry to be back in business,” she says.
Poteet knows firsthand that business continuity is not the same thing as physically remediating and rebuilding business and personal structures. As he reflects on the devastating impact of Hurricane Harvey on his community and continues to rebuild his real estate practice, Poteet says the experience taught him that everyone is on his or her own timeline when it comes to moving on with their lives and work.
“I can go through our neighborhoods today and physically see what stage people are at in the process,” says Poteet, who is about 95% finished rebuilding his family home. “I have neighbors that are still stuck back in the grieving stage, with their houses still sitting there almost the same as they were back in 2017. It just takes time.”
Local REALTOR® Associations are Affected by Disasters, Too
The Beaumont Board of REALTORS® (BBOR) and many of its members know full well the impact that catastrophic events can have on their personal and work lives.
According to Kathy Burkhalter, association executive for the 600-member board, the Beaumont area was impacted by Hurricane Rita in 2005, Hurricane Harvey in 2017, and Tropical Storm Imelda in September this year.
“We’ve been fortunate in that our association office was never touched by water, wind, or other destructive force,” says Burkhalter, “but we’re always prepared for what could happen.”
For example, she says staff took pictures of the interior and exterior of the building before the hurricanes, just in case they were needed for insurance purposes. The association has a small fire safe for keeping important documents, photos, and other records. “If we have to evacuate, we can just grab and go,” says Burkhalter. The office server and backup discs are taken offsite if evacuating the office, and staff members now use laptops that they can take home rather than desktops that they were using when Rita hit in 2005. BBOR maintains a hard copy of its member roster in case of a power outage or Wi-Fi connectivity issue.
Finally, Burkhalter says her own disaster recovery kit includes blank association checks, just in case staff members or other entities needed to be paid and she can’t make it back to the building. That’s exactly what happened after Hurricane Rita, when staff couldn’t get to the office for more than 10 days and again with Hurricane Harvey, when employees couldn’t get there for seven days. (BBOR’s disaster-situation policies provide authority for the association executive to act in this manner during emergency situations.)
Thinking back over those experiences, Burkhalter recommends local associations dealing with a disaster reach out to their members and to the state association, Texas REALTORS®, to spread the word about support requests or who can offer help. For example, she says the Texas REALTORS® Relief Fund has provided financial assistance all over the state for property owners after hurricanes and other disasters. “Tell Texas REALTORS® that you’re in an emergency-disaster situation,” says Burkhalter. “And even if you’re not impacted tremendously, remember to help your sister associations out.”