Is Homeowners Insurance difficult to obtain in Florida?

The sunshine state is often called the Pensioners’ paradise for good reason. It is the number one destination in the U.S. for retirees because of its balmy weather, low income and property taxes, active lifestyle opportunities, and its proximity to myriads of beaches and theme parks. For many infamous reasons, it is also one of the toughest states to get homeowners insurance, and that’s the topic of today’s blog.


Florida is home to six of the ten named home insurance perils including hurricanes, tornadoes, thunderstorms, floods, extreme heat and wildfires. When you add sinkholes, mold and termites to that mix, it is easy to figure out why it is so hard to obtain homeowners insurance in the state.

Florida’s homeowners insurance covers many types of losses. Every type of coverage is not available to all homeowners because of geography and location. The type and cost of insurance depends on which part of the state a home is located in. The state’s population is densely packed around the peninsula’s coasts and these are the areas that bear the highest risks. This means it is difficult to obtain insurance for oceanfront homes and homes located in hurricane zones. Homes located in areas prone to sinkholes may not get coverage for this type of loss. Since risks are lower for homes located in the central and northern part of the state, geography is less of a concern in these areas.

Florida laws protect insurance companies by allowing them to not accept applications in any part of the state for new or increase in existing coverage when the National Weather Service issues a warning or watch for hurricanes or tropical storms. Florida’s homeowner’s insurance does not cover flood damage, including water damage from a storm surge. Buying flood insurance may be impossible or prohibitively expensive for homes located in FEMA designated flood zones.

To remain competitive, insurance companies are expected to maintain top financial ratings from rating services firms like AM Best. If insurance companies’ issue too many policies to Florida homeowners, their financial ratings could be downgraded which in turn would make them less attractive compared to their competitors. Given Florida’s population growth, large numbers of applications are submitted to insurance companies annually and the underwriters selectively issue policies to low-risk homeowners with top credit ratings.

Due to historic and unprecedented number of natural disasters in recent years, insurance companies in Florida have issued billions of dollars to homeowners during this past decade. Unable to recover and remain profitable after such huge losses, many insurance companies pulled out of Florida, a couple of them were ordered to liquidate and three were taken over by the state government. For all these reasons it has become very difficult to get homeowners insurance in the state.
To ease the insurance crisis, the Florida legislature created a state insurance fund called the Citizens Property Insurance Corporation in 2002. It is now Florida’s largest home insurer. For many years, this was the only option for Floridians. However, due to calmer storm and hurricane seasons since the past couple of years, eight global insurance carriers have cautiously entered or re-entered the homeowner insurance market in the sunshine state.
While new homeowners continue to relocate to Florida to enjoy beautiful beaches, abundant sunny days, low taxes and other benefits, there aren’t a lot of companies left in the sunshine state that offer homeowners insurance.
Here are a few homeowner insurance resources for Florida residents:
The Florida Office of Insurance Regulation (FLOIR): http://www.floir.com/
Citizens Property Insurance Corporation: https://www.citizensfla.com/index.cfm
Florida Market Assistance Plan (FMAP): http://www.fmap.org/

LPS: Foreclosure Backlog Stands at 30x Foreclosure Sales Volume

New data released by Lender Processing Services (LPS) Monday show that while delinquencies continue to decline, an enormous backlog of foreclosures still exists with overhang at every level.

As of the end of February, foreclosure inventory levels stood at more than 30 times monthly foreclosure sales volume, indicating this backlog will continue for quite some time, according to LPS.

Ultimately, these foreclosures will most likely reenter the market as REO properties, LPS notes, putting even more downward pressure on U.S. home values.

The company reports that the average U.S. loan in foreclosure right now has been delinquent for a record 537 days. A full 30 percent of loans in foreclosure have not made a payment in over two years.

Still, LPS says its data show that banks’ modification efforts have begun to pay off, as 22 percent of loans that were 90-plus-days delinquent 12 months ago are now current.

February’s data also showed a 23 percent increase in Option-ARM [adjustable-rate mortgage] foreclosures over the last six months, far more than any other product type.

In terms of absolute numbers, Option-ARM foreclosures stand at 18.8 percent, a higher level than subprime foreclosures ever reached, LPS said.

In addition, deterioration continues in the non-agency prime segment.

According to LPS’ report, both jumbo and conforming non-agency prime loans showed increases in foreclosures and were the only product areas with increases in delinquencies.

LPS reports that the total U.S. loan delinquency rate stood at 8.8 percent as of the end of February. The U.S. foreclosure inventory rate hit 4.15 percent.

By the company’s calculations, there are a total of 6,856,000 mortgages in the United States that are considered non-current.

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Debate on Fannie, Freddie's future begins

Washington lawmakers will start the debate on the future of housing finance after the Federal Deposit Insurance Corp. releases a report on risk retention rules, CNBC reports. Why is this important? Because we may see the end of 30-year fixed mortgages as we know it. Banks may have to take more risk, Fannie Mae and Freddie Mac may be a totally different organization, and home buyers may have no choice but to put down 20 percent of the payment upfront.

Who's the boss: real estate agent or client?

Perhaps an easy way to approach the answer to this question is by using an analogy of a car owner and an auto repair shop owner. Technically, the client is the boss at the repair shop, but does that mean the client has mastery over fixing cars? Not really in most cases. Going by the norm, the car owner is rightfully the client, but the owner of the repair shop is a “subject matter expert or SME.” In order to accomplish objectives, the car owner (the client) must appreciate and acknowledge that he/she cannot fix cars and only the repair shop owner (the SME) can. The logical conclusion of this analogy is a common goal can be achieved only with the client and the SME work cohesively, like partners. After all, their objective is the same: to get the car fixed.


The very same analogy is equally applicable and relevant while answering whether the real estate agent or the home owner is the boss. In this case, the real estate agent is the SME and the potential home owner is the client. Their objectives are the same: to find the right home. The American approach to customer service has only two golden rules: 1. the customer is always right, and 2. go back to rule number 1.

Yes, we all understand these golden rules. But the fact is not all clients are made the same way. Some are demanding, some are patient and cooperative, some are punctual and some are not…and the list goes on. In an ideal world, every real estate agent would find an ideal customer. But unfortunately, we live in the real world which is not always ideal. This is where the 80-20 rule comes in handy. Like in most real life and business scenarios, a real estate agent can consider themselves lucky if they find two ideal clients for every ten clients they represent. It would be nice if there was a scientific way of pre-screening potential clients to determine if they had all the ideal qualities. But in the absence of such magic bullets, the onus is on the agent to adapt as best as they can to all varieties of clients, or take some proactive steps to weed out the avoidable ones.

So how does an agent do that? For starters, it may be prudent for the agent to arrange a preliminary meeting with a potential client and use it as an opportunity to not only figure out the prospect’s wish list, but to also determine if the prospect has the qualities of becoming an ideal client. This can be done by keenly observing several obvious and subtle behavior patterns. Was the prospect on time for the meeting? Were they very clear and organized about their wish list or was it vague? Did the prospect think of the agent as a SME or someone who is only interested in collecting commission after the sale? Was the prospect too demanding, rude or disrespectful in any way?

Answers to these and many other mental observations can help an agent in creating a win-win, boss-less relationship that’s transformational instead of just transactional. With this approach, it is also possible for the agent to achieve a near 100 percent “ideal client” rate, wherein both the client and the SME end up “working with” each other as partners, instead of the agent ending up “working for” the Boss (client) in a one-way transactional direction.

The Role of a Short-Sale Specialist

In the midst of record foreclosures, homeowners that are desperate to avoid foreclosure are increasingly seeking short sales, where the lender avoids foreclosure of a property by selling it at a price that’s less than the mortgage on it. Short sales have tripled since 2008, with numbers reaching four million in 2010. The popularity of short sales has inspired several scam artists as well. Therefore it is very important to prudently choose a short sale specialist from a reputed real estate firm.

 

An agent that specializes in short sales plays a critical role in the entire process. The qualities and roles of a great short-sales specialist are intertwined. Here’s a short list of both: 

• Must have well developed relationships and contacts with many banks
• Be knowledgeable in bank-specific foreclosure processes
• Possess great negotiation skills to deal with multiple lien holders
•  Be familiar with Broker Price Opinions (BPO) and property valuations
• Know state laws regarding short-sales and foreclosure prevention thoroughly
• Prepare short-sales packages that get the attention of negotiators
• Know the technical process of preparing preliminary HUD-1 closing statements
• Ability to handle multiple offers effectively
• Communicate with title companies, attorneys and third parties to coordinate closing
• Deal effectively with environmental risks and code violations
• Determine if and when postponing a foreclosure proceedings is appropriate
• Prevent banks from cutting real estate commissions deeply
• Protect and offer competitive commissions so that other Realtors are incentivized
• Get banks to pay for FHA repairs to make the house more saleable
• Avoid or minimize the chances of sellers having to sign promissory notes for portions of the deficit.

  

As a realtor with Coldwell Banker Ackley Realty, Paul Antonelli has watched hundreds of people ask for help to avoid foreclosure and most of them have been given bad information about what they can do. To make sure homeowners are armed with accurate and trustable information, the Central Florida Real Estate Show will boast two additional Orlando-based experts including Colleen Mitchell, a Wells Fargo Mortgage Broker, and Charles Castellon, a real estate foreclosure attorney.

  

Antonelli said, “It is my goal to make sure homeowners know what road to take before they make any decisions, because the wrong decision could cost you. For example, if a home goes into foreclosure and the bank sells it for less than it owned, most people are completely unaware that the bank can still come after them to pay off the rest of the money even if it already foreclosed.”

 

 

You can contact a short-sale specialist at Coldwell Banker Ackley Realty by sending an email to CBARShortSale@gmail.com or visit our Short Sale Savvy Blog.

 

Decline in real estate sales greater than stated?

While most experts had predicted that the residential real estate market in 2011 would remain unchanged from 2010, many had also expected a faster absorption rate of unsold inventory of existing homes compared to the previous year. This expectation seemed real for a fleeting moment in early 2011, mostly due to the buzz created by expectations. However, recent data indicates that sales of existing homes may decline further this year.

According to statistics released by the National Association of Realtors (NAR), 4.9 million existing homes were sold in 2010, which amounted to a 5 percent decrease from 2009. But data collected by CoreLogic estimates that sales of existing homes actually fell 12 percent to 3.6 million homes. The difference in these figures is largely due to the data sources and methodologies used by NAR and others.

NAR's numbers are based on data collected from multiple listing services and large brokerages. This means properties bought by banks at auctions for the value of their outstanding loans would likely be considered as sales on the NAR data. Such properties also show up on comps as “sold,” whereas in reality, these are bank-owned unsold properties. CoreLogic gets its numbers from public sales records from courts and counties. CoreLogic believes NAR’s methodology inflates actual sales by 15-20 percent. Inventory of unsold homes on the market in November 2010 represented a 16 month supply according to CoreLogic, as compared to NAR’s 9.5 months.
If CoreLogic’s numbers are true, there are plenty of unpleasant implications worth mentioning. A slower sales rate means it will take longer to sell unsold inventory. More homes for sale in a given market mean lower prices. There are many factors contributing to the decline in sales. Anemic sales caused by the expiration of the federal homebuyer tax credits, the impact of sales of distressed properties, and the excess supply of unsold homes are all choking the sales and prices of real estate.

A national repeat-sales home-price index compiled by CoreLogic was down 5.1 percent in November 2010 from a year ago. If that trend continues, home prices nationally will probably be down 10 percent year-over-year by spring of 2011.

Foreclosures to Eclipse 2 Million This Year

In case you missed the news the other day, Nobel Prize-winning economist Joseph Stiglitz dropped another bombshell on the nation’s real estate industry. He expects an additional 2 million foreclosures to hit the U.S. this year – adding to the whopping 7 million that have occurred since the economic crisis of 2008.




“U.S Foreclosures are continuing apace,” Stiglitz told a packed news conference near Port Louis, the capital of Mauritius. “A quarter of U.S. homes are underwater.”



Why the gloomy forecast? Because the number of U.S. homes worth less than their outstanding mortgage jumped in the fourth quarter as prices dipped and lenders seized fewer properties from delinquent borrowers.



Currently 15.7 million homeowners had negative equity, also known as being underwater, at the end of 2010, according to Seattle-based Zillow Inc. That’s a 13 percent increase over the 13.9 million in the previous three months.



That total represented 27 percent of the mortgaged single-family homes, the highest in Zillow data dating back to the first quarter of 2009.



The news on the local front appears just as bleak. The Orlando Sentinel reported in its February 12th edition that the number of foreclosed homes on, or about to hit Metro Orlando’s resale market has more than doubled in the past year – forcing down the prices of other houses that have already lost more than half of their value since before the recession.



The four-county metro area of Orange, Seminole, Osceola and Lake counties had 13,712 bank-owned properties in January – up from 5,874 a year earlier, according to figures from California-based RealtyTrac. This has contributed to a record statewide glut of foreclosed properties that now stands at 104,759 and counting.



“Americans today are worse off than they were 10 to 12 years ago,” Stiglitz said, adding that the U.S. faces “increasing inequality,” with the “upper 1 percent controlling 40 percent of wealth. Instead of trickling down, it has trickled up.”



There are, however, some significant positives that have come to light.



First, foreclosures did slow down in the fourth quarter. Lenders, including Bank of America Corp. and Ally Financial Inc., halted many home seizures after accusations they used improper documentation and processes. Attorney generals in all 50 states are investigating.



But, more importantly, the wave of foreclosures, especially here in Central Florida, has created a tidal wave of opportunities for both homebuyers and investors alike.



Prospective buyers who previously were priced out of the housing market are using this opportunity and taking advantage of lower property values to purchase their first home and begin a new chapter toward their futures. Lower property values also have been a boon to investors who are adding to their real estate portfolios.



Take Larry and Janelda Minor, for example. They purchased a vacant eight-unit apartment complex in Kissimmee valued at $350K for just $200K. Within a few months all eight units were fully rented – a property lemon was turned into lemonade.



“Our experience with Rajia Ackley with Coldwell Banker Ackley Realty while purchasing the property was very positive,” the Minors said. “Our questions and concerns were answered quickly and completely throughout the entire process. We appreciate her guidance in helping us secure this commercial property during these trying times.”



Despite the gloomy real estate predictions of Joseph Stiglitz, et al, there’s still some happiness to be found. Just ask the Minors.



We’ll keep you updated.