As realtors, you spend a lot of time with a new home seller to ensure their home is at its best in order to sell the fastest and at market price. Similarly, you assist your homebuyer to find a home that is at its best, leaving few repairs to do after purchase.
On August 2, 2012, however, Citizens Insurance threw Florida realtors another curve to navigate. They sent a technical bulletin to all their Florida agents that promulgated new requirements for potential and current policyholders. These changes could mean more pre-selling expenses for a homeowner or a homebuyer may pay higher premiums or not be eligible for property insurance through Citizens, a state-backed corporation.
Known as the property insurer of last resort and created to be a safe haven for homeowners, Citizens is now Florida’s largest insurer with an estimated 1.4 million policies. Most of the firm’s risk is concentrated in South Florida and the Tampa Bay area, where many homeowners cannot get or cannot afford coverage in the private insurance market.
A four-point inspection is now required for all homes that are more than 30 years old. All new policyholders must comply after September 1, 2012, and all current policyholders renewing their policies after October 1, 2012, may be required to comply if requested by the underwriter. The inspection covers the roof, electrical, plumbing and HVAC (heating, ventilation and air conditioning). There are some new plumbing rules, some revised electrical rules, and the optional coverage for permitted incidental occupancies (PIO) is no longer available, which primarily covers the liability and property associated with a home business. Additionally, if the inspector includes two outside photographs of the roof, a roof certification will not be required.
If the property has any of the following, Citizens will not underwrite or renew a policy: (1) polybutylene plumbing, (2) systems not in good working order, and (3) any visual signs of active leaks or unrepaired water damage.
Citizens added a requirement for remediation of aluminum branch circuit wiring, and any home with service of fewer than 100 amps will not be underwritten or renewed.
According to their board chairman Carlos Lacasa, it is to ensure that the condition of the property is acceptable and all major systems of the home are in satisfactory condition for storm damage coverage. If the inspection shows unacceptable conditions, Citizens will not underwrite the property. Problems found in any of the four points may incur a substantial premium hike or cancellation of a current policy or being declared ineligible for coverage with the firm.
The re-inspection program actually began in July of 2010, but created such a controversy and media uproar that Citizens revised it to this new program. Before 2010, these new requirements were only on homes that were more than 50 years old. Some other property insurance companies have had this requirement for many years.
According to the August 17th Miami Herald, a “staggering $137 million in premium increases” have already been tied to the 2010 program – that is an average of $810 annual premium increase after an inspection.
Homeowners who disagree with the results of the four-point inspection can receive a new free inspection from a different inspector. They also can receive a second free inspection if they upgrade their home within one year, fixing all problems noted in the first inspection. If the policyholders lose their discount because the attic was inaccessible during the inspection, they will have one year to clear the attic and do another inspection before any premium increases go into effect. Additionally, Citizens is willing to provide homeowners with educational materials on the inspection, and policyholders can contact their agents for other alternatives to dispute the inspector’s findings.
Not only can these changes affect the price of a home being sold in Florida but also some homes may not even sell if they cannot be insured – or a new homebuyer is without property insurance or must file suit against the original homeowner (and possibly the realtor) for reimbursement for the required upgrades. This requires extra vigilance on the part of realtors to protect all of their clients – both sellers and buyers.
The four-point inspection must be completed within 12 months of renewal or new underwriting by Citizens and must be on a form containing the new requirements.