Flood insurance rate hikes begin taking toll on property market
By Zac Andersen
Hefty flood insurance rate increases are starting to have a pronounced impact on Southwest Florida’s real estate market heading into the new year, hurting sales and upending the business in high-risk flood zones.
Lawmakers from Florida and other flood-prone states still hold out hope that the National Flood Insurance Program rate increases can be rolled back, but real estate professionals say the hikes are already taking a toll in certain neighborhoods.
Home sales have stalled, sellers are dropping prices and the mechanics of completing a deal are becoming more complicated.
“We’ve seen a lot of closings just fall through,” said Bob Strayer, owner of Strayer Surveying & Mapping in Venice, who conducts surveys of properties to determine their elevations for flood insurance purposes.
Since Congress failed to pass a flood insurance fix before adjourning for the holidays, a group of senators — including Florida Democrat Bill Nelson — from states with large numbers of flood policies have been pushing for a vote early this year on legislation that would delay the new rates.
Congress approved steep rate hikes to the National Flood Insurance Program in 2012 to help make up losses after Hurricane Katrina. Older, low-lying properties in high-risk flood areas are being targeted for the largest increases.
The new rates are being phased in for most property owners. But when a home sells, the new owner must pay the entire “full risk” rate at once.
One of Clapp’s agents recently worked on a deal in which the property insurance went from $1,400 to $6,000. The seller had to drop the price, or the buyer was ready to pull out.
“It’s dramatically affecting buyers,” Clapp said.
Real estate agents are being forced to change how they do business.
Buyers and sellers have been getting into disputes over money held in escrow.
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