One issue that seems to get continually overlooked in this whole debate over Bill 408 is what affect will this new law have on the housing market? We predict a horrible outcome and foreclosure spikes. There are several serious concerns that arise. Bill 408 tries to accomplish two goals: 1) limit, decrease or altogether prevent insurance companies from paying benefits for the majority of claims that are made and 2) let insurance companies off the hook from the requirement of offering sinkhole coverage.
Lets look at the first goal. As a homeowner if you have concerns of sinkhole damage at your home you will naturally file a claim. It surely doesn’t make any sense to sit around and do nothing as new damage appears around you every day. Once a homeowner files a claim, the home will be investigated and if sinkhole activity is discovered, that home is tagged as a sinkhole home for eternity. The report usually is filed in public records and the homeowner is required by law to disclose of the sinkhole problems to any potential purchasers. Thus home is now virtually worthless unless repaired. Most legitimate and professional sinkhole repairs can cost well over a hundred thousand dollars. No one has that much money laying around in this economy and even if they did, why dump that money into a struggling housing market? That’s throwing good money after bad. So as a homeowner with a confirmed sinkhole home with progressing damage and the inability to sell or repair your house what do you do? Simple. You walk away and make it the banks problem. Now the foreclosure rates spike and home prices plummet even further as homes are being auctioned off for pennies on the dollar.
Lets look at the second prong. Once (not if) Bill 408 passes very few, if any, insurance companies will offer sinkhole coverage anymore. We can almost guaranty with 100% certainty that no carriers will offer sinkhole coverage in Pasco/Hernando counties anymore and other counties like Pinellas, Hillsborough and Polk will be tough as well. If you live in one of these areas you likely are aware that most banks or lending institutions will not loan money to purchase a home without the requirement of carrying sinkhole insurance on the property. Well, if no insurance companies offer sinkhole insurance what does a homeowner do? The new trend we are seeing is that the banks themselves are forcing homeowners to buy an insurance policy from the bank. Essentially the bank insures itself and charges a ridiculous premium for it. This puts a homeowner in a bad spot. You find the home of your dreams for a good deal but the only way you can get financed is by purchasing an insurance policy from the bank. Homeowners will either be strong armed in to buying the policy or will not be able to afford the policy and will walk away from the deal.
Either way, once Bill 408 sweeps over the state I don’t see how home prices don’t dip even further, I don’t see how borrowing money doesn’t become more difficult and I don’t see how foreclosures don’t spike. Real estate is the most valuable commodity here in Florida and is what has to rebound first to boost our economy. For some reason, the Florida Legislature is willing to sacrifice our real estate market to help out some fat cat insurance companies. It all makes no sense.
What do you feel is the likelihood that Bill 408 will be retroactive? I’m shocked it passed at all and now am concerned it could very well apply to all claims; not just new ones.
Love your blog by the way!
The new bill is retroactive at this time. They phrased the bill in a manner that all they claim they are doing is going back to “clarify” what the prior statutes should have said. This is their clever way to disguise the fact that they are really changing homeowners substantive rights. The problem the carriers will face as the last comment pointed out, several carriers have not “updated” their insurance policies in years so that they still cover “physical damage”. In Florida, the insurance policy carries more weight than the statutes so those carriers will have to completely re-write their policies in the future but it won’t save them for existing claims, in our opinion at least.
I filled a sinkhole claim 6mths ago, the insurance company has taken their sweet time in dealing with it. They have sent everyone out to test our property, and we are now waiting on word back with the finding from the insurance company. I know we have a problem and it is getting worse all the time. Do you know if the Bill was actually retroactive, and how will this affect me?