New Form Required on Florida Home Sales
A new form just arrived June 1st informing buyers of what the homeowners insurance and flood insurance may cost, and if the cost exceeds the amount disclosed then buyer may have a right to cancel contract.
There have been significant changes to homeowners and flood insurance policies and costs in the past few years and some are quite surprised at the hoops they must jump through to obtain affordable insurance.
The Ellis Team is strongly encouraging our sellers to provide an elevation certificate so we can obtain upfront what the flood insurance costs will be. Without the elevation certificate insurance agents are forced to quote off the base elevation which can be much costlier. Some buyers were surprised to find out flood insurance was tens of thousands of dollars on a property. This is one reason the National Association of Realtors urged Congress to make changes to the flood program.
These changes are in effect now, but having the elevation certificate helps. Many people don’t realize the buyer can assume the seller’s flood policy. This is worth examining as well.
Homeowners insurance has seen its share of changes too. Wind mitigation surveys can significantly reduce policy premiums on homes, especially homes built before 2002. Older homes are getting costlier to insure because they were built to lesser codes.
I called Peter Craig over at Pacific Crest Insurance as he has been bailing us out and saving deals for us from surprised buyers brought in by other agents who didn’t know about inspections and saving money. Peter told me about a company that is charging $800 to nail in clips so that the insurance companies will reduce premiums. If the home has certain features like hurricane clips or straps the premium is reduced. Homes built before 1985 typically don’t have either so having nails put in helps with costs.
He also told me about a survey company that does elevation certificates quickly. We ordered one for a property because the seller didn’t have one and got it back within a few days. I think the seller paid $130 or so for the certificate, but it saved his deal and saved the buyer thousands on insurance.
Many buyers qualify for the home, but when they find out the homeowners and flood insurance costs are so high without these discounts they no longer qualify. I’ve talked with several agents who have lost deals because buyers no longer qualified for the home. It’s knocking them out on their ratios on the monthly payment.
Sellers used to not care because it was the buyer’s issue, but that’s no longer the case. It’s not about if the buyer pays more in insurance, it’s about whether the buyer can still qualify for the home. Most buyers buy as much as they qualify for, but when insurance costs are double or triple what the lender used for their monthly payment, it knocks them out of the deal. Now sellers care, and if they don’t, they soon will when they start losing deals on their home. Even if the buyer hasn’t bought as much as they can afford, they still shy away when they see high yearly insurance premiums they weren’t prepared for.
Now the new disclosure addresses this upfront, which is a good thing. For it to work properly, getting quotes before you find the buyer is essential, so I’d recommend real estate agents find a good insurance agent and do the research on each listing before you find the buyer. Having the elevation certificate is crucial. A wind mitigation report is helpful as well.
It’s so much easier to sell a home once than several times. Getting this information upfront can save deals and get the sellers on their way to their next property and get buyers into their home the first time. It’s more work on the front end, but it will help keep deals together and save work on the back end.
Good luck and Happy House Hunting!
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