After Irma...what about insurance in hurricane-prone states?

Question: I'm thinking of buying a house on the water in Florida, but know that homeowners insurance can be complicated because of hurricanes. What do I need to know to get the right coverage without paying too much?

Answer: The risk of hurricanes makes buying homeowners insurance in Florida and some other states much more complex and expensive than it is in many other areas. It's important to find out about a house's insurability before buying it so that you don't end up with annual premiums that are several thousand dollars more than you were expecting to pay. While the advice below is specifically for Florida, it can also apply to homebuyers in other states that are at risk for hurricanes.

Get a wind mitigation inspection. Before buying, ask for a wind mitigation inspection in addition to a standard home inspection. This inspection will include information on the shape and age of the roof (a hip-shaped or pyramid-like roof from 2002 or later is usually best), the size of the nails used to attach the roof to the truss, the device used to hold the trusses to the walls, and whether the home has hurricane shutters or impact glass, says Chris Heidrick, an independent insurance agent in Sanibel, Fla.

"The cost to insure a home without wind mitigation features could be four times higher than a home with wind mitigation," he says. Then ask an insurance agent to use that information to help estimate the cost to insure the house.

Check the home's CLUE report. The Comprehensive Loss Underwriting Exchange (CLUE) is a database in which insurers share information about home insurance claims to help identify a property's risks when setting premiums. The CLUE report shows the amount, type and date of each claim over the past five years, so it can alert home buyers to potential problems that could cause costly damage and perhaps affect their insurance rates.

You can't order a report on a home you don't own yet, but your real estate agent can ask the seller for a copy of the "Home Seller's Disclosure Report," a version of the CLUE report that excludes personal details. Homeowners can order the report for $19.50 at the CLUE Home Seller's Disclosure Report page.

Shop around for home insurance. The availability of coverage and premiums can vary a lot by insurer. The Florida Office of Insurance Regulation has a great Rate Comparison Tool that provides premium estimates from the insurers selling home insurance in your county based on three general categories: a home valued at $150,000 and constructed before 2001 (when building requirements changed) with wind mitigation, the same home without wind mitigation, and a newly constructed home valued at $300,000. Your premiums will vary widely based on your home's location, design and wind mitigation details, but the tool can give you a rough idea of the premiums and the list of insurers selling coverage in your county.

Among the insurers listed on the comparison tool is Citizens Property Insurance Corporation, a not-for-profit created by the Florida legislature in 2002 to provide insurance to property owners who can't find coverage from private insurers. You can find an independent agent in your area who works with many companies and knows the local marketplace at TrustedChoice.com. Also see the Florida Office of Insurance Regulation's Hurricane Season Resources for more information about your rights, insurers selling coverage in your area, and resources to help you find a policy and get your claim paid.

Check the insurer's complaint record. Before you pick an insurer, make sure it doesn't have a history of hassling people at claim time – especially if you live in an area that's prone to major disasters. You can use the National Association of Insurance Commissioners' Consumer Information Source to check the insurer's complaint ratio, a figure that compares the number of complaints against an insurer in relation to the amount of premiums it takes in. An insurer with a complaint ratio of more than 1 has higher-than-average complaints. Type in the name of the company and click on "property/casualty" under "business type," then click on "closed complaints" and "closed complaint ratio report," and finally on "homeowners insurance."

Understand your windstorm coverage and deductible. Until a few years ago, many people in high-risk areas had to buy separate policies to cover windstorms. Now, more insurers are offering windstorm coverage as part of their homeowners policies, says Heidrick. But you may have a higher deductible for hurricane damage.

For example, you may have a $500 deductible for most claims, but a deductible of 2 percent or 5 percent of your coverage amount for damages caused by a hurricane. If you have a $300,000 policy and a 2 percent hurricane deductible, you'd have to pay $6,000 out of your pocket before your insurance would cover any hurricane damages. Try to keep enough money in your emergency fund to cover those potential expenses.

Find out about flood coverage. If you live in certain flood zones, your mortgage company will require you to get flood coverage, which is not covered by homeowners insurance. You can get coverage from the National Flood Insurance Program. You may also be able to find flood coverage from a growing number of private insurers, which may have higher limits than the federal program.

Ask your insurance agent about your options, or find out about private insurers selling flood coverage at the Florida Office of Insurance Regulation's Flood Insurance Resources page. The price can vary a lot by insurer. Or see whether the current homeowner has an NFIP flood insurance policy that is grandfathered (using older and usually lower rates) and can be assumed when you buy the house, which may be the best deal, says Heidrick.

Protect your home. You may be able to take additional steps to protect your home and get a discount on insurance. Or ask the seller to provide compensation for these improvements when you make your offer. See the Florida Office of Insurance Regulation Notice of Premium Discounts for Hurricane Loss Mitigation for a list of improvements that can reduce your rate.

"I've had clients who, after purchasing a home, replaced the roof and put in hurricane shutters and cut their insurance premiums in half," says Heidrick.

Copyright © 2017 The Kiplinger Washington Editors,Kimberly Lankford, Contributing Editor, Kiplinger's Personal Finance

© 2017 Florida Realtors
Reprinted with permission Florida Realtors. All rights reserved.

Florida International University Study: Homeowners will pay most of Hurricane Irma damage out of pocket

MIAMI – Sept. 22, 2017 – It will be years before the true cost of Hurricane Irma is clear, but a team of Florida International University (FIU) researchers estimates that the storm's winds alone will set the Sunshine State back $19.4 billion.

Of that total, FIU's researchers said, $6.3 billion of the bill goes to insurance companies, leaving homeowners to shoulder the other two-thirds of the losses. The worst hit areas are in Lee and Collier counties, where Irma came ashore.

"This is not surprising given the high level of hurricane deductibles and the less intense tropical storm in most of Florida," Shahid Hamid, the FIU business professor who heads the research team, said in a statement.

Hamid's team used the Florida Public Hurricane Loss Model – Florida's benchmark for assessing insurers' financial risks and setting premiums insurance customers will pay – to calculate the cost to homeowners. The estimate is based on preliminary wind data from NOAA and will change as better information is available.

Flood loss will add another couple billion to the total damage amount, researchers said.

FEMA's National Flood Insurance Program estimates insured residential flood loss under the program will be around $5 billion to $8 billion. Insured commercial flood loss, most of which is covered by private insurers, could cost around $4 billion to $8 billion.

A study by information company CoreLogic showed the storm's damage to the U.S. is estimated to be between $42.5 billion and $65 billion.

Copyright © 2017 Miami Herald, Alex Harris. Distributed by Tribune Content Agency, LLC.

© 2017 Florida Realtors
Reprinted with permission Florida Realtors. All rights reserved.

Florida Residents Create "Solar Co-ops"

Solar co-ops help neighbors get installation discounts

MIAMI – June 2, 2017 – Florida residents interested in solar energy have a new way to research products and get installation discounts by working with like-minded homeowners in their area through "solar co-ops."

The Florida League of Women Voters and a group called Florida Solar United Neighborhoods (FL SUN) on May 24 announced the first two co-ops out of six that they're hoping to establish in Miami-Dade County. The website now lists four Florida co-ops, though the list is growing: the Alachua County Solar Co-op, Central Miami (North) Solar Co-op, Central Miami (South) Solar Co-op and the Seminole County Solar Co-op.

"There's no cost to join a co-op, there's no obligation to go solar through a co-op. We aim to educate residents on the power of solar and help organize these co-ops to grow the solar movement in Florida," says Jody Finver, the county coordinator for FL SUN.

The groups work by organizing homeowners in areas like counties, neighborhoods or municipalities who are interested in solar energy for their homes. FL SUN works as the liaison between the residents and solar contractors once about 30 qualified homes sign up.

Once a co-op has enough interested owners, FL SUN sends out a request for proposals to contractors, which then agree to give the members of the co-op up to a 20 percent group discount for going solar.

"With solar, you are reducing your family's carbon footprint, and there's not many ways you can do that and save money," says South Miami Mayor Philip Stoddard. Leaders with FL SUN hope to get at least 350 homeowners to go solar and sign up for the co-ops. They said that the group's information sessions have attracted about 4,000 people statewide so far.

Source: Miami Herald (05/25/17) Dixon, Lance

© Copyright 2017 INFORMATION INC., Bethesda, MD (301) 215-4688  

© 2017 Florida Realtors
Reprinted with permission Florida Realtors. All rights reserved.

April 2017 Palm Beach County Residential Real Estate Market Update

Changes in the Mortgage Application Process

NEW YORK – May 10, 2017 – If you're looking for a mortgage, there's one less reason to walk into a bank these days. Alternative mortgage lenders "non-bank companies without customer deposits" are transforming the mortgage industry. Their goal: to offer mortgage rate transparency and help you complete the home loan process quickly, efficiently and mostly (if not completely) online.

The biggest banks, once major players in the $1.5 trillion mortgage industry, have backed away from a large portion of the business, citing low profit margins and high legal risks. It's a result of the enhanced regulatory environment that followed the 2008 housing meltdown.

A number of new players jumped into the void – alternative lenders testing new business models and leveraging technology to improve the process of getting a home loan or mortgage refinance:

• Marketplaces and brokers assist potential borrowers shopping for mortgages and the best mortgage rates.
• Online mortgage lenders seek to shorten the home loan process.
• Non-bank lenders offer solutions to credit-challenged consumers.

But the structure and capabilities of these alternative lenders vary widely. Here's how to navigate the field.

Marketplaces and brokers are mortgage middlemen

The easiest way for tech startups to enter the mortgage market is by serving as a middleman. So that's what you'll encounter most in your search for an online mortgage.

Mortgage marketplaces, like LendingTree, Mortgage Hippo, Zillow and eLoan, are lead generators for loan originators. Here's how that works: Their mortgage rate algorithms take your basic application info and present you a roster of potential lenders. You choose one, or several, of the rate options, and the referring marketplace site receives a fee for the lead. You then complete the process with the lender.

Online mortgage brokers offer another twist on the process. Companies like Sindeo provide a concierge service, with advisors guiding you through the home loan selection process. It's more of a hands-on process, in which the broker works closely with you and the lender to complete your loan package.

Online alternative mortgage lenders streamline the process

Alternative lenders are online mortgage originators that are becoming more of a force in the industry. In fact, the largest of them, Quicken Loans, has become one of the largest mortgage lenders in the country. And the company is looking to become even more entrenched with its recent introduction of a 'Rocket Mortgage' service, promising full mortgage or refinance approvals online in as little as eight minutes.

That kind of near real-time approval is an example of how radically the mortgage process is changing. Next-gen lenders strip away layers of delays built into the old system by using automated loan-decision algorithms, electronic document gathering and secure online communications.

Seeing an opportunity to shave off a sliver of the monumental home loan market, new players are making a move to mortgages. Online student-loan refinance service SoFi now offers mortgage loans. And in just five years, Loan Depot has grown to 5,000 employees, offering mortgages as well as consumer loans to residents in all 50 states.

Another example is Lenda, a recent addition to the home loan landscape, which so far serves only a limited number of states but is a direct online lender offering purchase and refinance loans.

Non-bank alternative lenders cater to those with less-than-perfect credit

In some ways, the mortgage industry is coming full circle, back to where it started. Wells Fargo, JPMorgan Chase, Bank of America and other huge lenders "battered by Justice Department fines, federal lawsuits and growing regulation as a result of the housing crisis" are shying away from mortgage lending, especially FHA loans, which have long catered to first-time homebuyers and borrowers with lower credit scores. As more of the large, national banks move to lending only to the most-qualified borrowers, community home lenders are filling the void.

Non-bank lenders are much like the original mortgage bankers; many are locally owned and family-run businesses serving their hometowns. These smaller lenders often face fewer federal regulations and still welcome borrowers with less-than-perfect credit, and they have bolstered the FHA-backed lending that big banks have been avoiding.

Credit unions also play a growing role. They originated more than 8 percent of U.S. mortgages in 2015, nearly double their amount in 2010, according to the CUNA Mutual Group.

There are non-bank mortgage lenders with national footprints, such as PennyMac, but just like their local counterparts, they are built more for phone and face-to-face transactions than for a strictly online loan process.

You have more mortgage options than ever

Alternative mortgage lenders now account for almost half (45 percent) of all home loans, according to the Federal Reserve "the largest share in 20 years. These originators are transforming the mortgage loan process with faster approvals plus online application and document processing, and they are powering a more competitive market.

But getting a mortgage online is not always strictly a keyboard- or smartphone-only transaction. While the paperwork process is moving more and more to e-documents, with some online services you'll still have to visit a closing attorney or notary to finalize the loan.

Choosing whether to go with a mortgage middleman or a direct lender is a personal choice, based on your comfort and familiarity with the home loan process and how much guidance and advice you prefer.

But it's empowering to know that when it comes to financing a home, you have more options than ever.

Copyright © 2017 The Steuben Courier Advocate, Hal M. Bundrick, CFP. All rights reserved. Hal Bundrick is a staff writer at NerdWallet, a personal finance website.

© 2017 Florida Realtors
Reprinted with permission Florida Realtors. All rights reserved.

Energy Efficiency Considered in More Appraisals

Energy efficiency considered in more appraisals

CHICAGO – March 22, 2017 – Energy efficiency scores will soon be included on appraisal forms in a handful of states. Builders are applauding the change, saying that will help give more credit for energy-saving features as a collaboration between the Residential Energy Services Network (RESNET) and the Appraisal Institute is bringing HERS scores – Home Energy Rating System – to appraisal forms.

The HERS Index is a numerical rating system that measures energy consumption compared to a standard house, which has a score of 100. A house that has a HERS index of 70, for example, would use 30 percent less energy. A home with a HERS index of 130, on the other hand, would consume 30 percent more energy.

The lower the HERS score, the lower the energy costs.

"One of the largest barriers to the building and selling of high energy performance homes is that the value of energy upgrades is too often not reflected in the real estate appraisal of a home," RESNET Executive Director Steve Baden told the Insulation Institute. "Many of the features that make a home energy-efficient are hidden behind drywall and aren't obvious to homebuyers."

Baden says his goal is "to make information, such as the HERS score of a home, visible in the appraisal so that consumers have more facts available to make their decisions."

In states that start to include the HERS score, it will be added to an existing green-building addendum appraisers use.

Source: "A Move Toward More Helpful Appraisals," Greenbuildingadvisor.com (March 16, 2017)

© Copyright 2017 INFORMATION, INC. Bethesda, MD (301) 215-4688  

© 2017 Florida Realtors - Reprinted with permission Florida Realtors. All rights reserved.

U.S. House Studying Flood Insurance Extension

WASHINGTON – March 15, 2017 – Looking down through the open door of U.S. Coast Guard helicopter, the most recognizable sight for U.S. Rep. Sean Duffy in the vast expanse of Lafourche Parish wetlands in Louisiana below was a herd of grazing cows.

"That probably looks like your district," U.S. Rep. Steve Scalise, R-Jefferson, said to the Wisconsin Republican.

"I feel right at home," Duffy answered.

Duffy is the new chairman of a House subcommittee on housing and insurance and will run point on this year's renewal of the National Flood Insurance Program (NFIP). If Congress doesn't act by Sept. 30, 2017, the program will expire, throwing uncertainty into the insurance market.

On the helicopter flight, Scalise wanted Duffy to see a crisscross of earthen mounds that had streaks of road along their crests. He considers them key to a new focus on NFIP insurance. When the Federal Emergency Management Agency (FEMA) produced its latest elevation maps to predict flooding risks in southeastern Louisiana, Scalise says, it sometimes did not recognize that many of those local or private bulwarks held back floodwaters. As a result, he says, some residents and businesses saw their insurance rates jump as if there were no levees at all.

Improving how to accurately assess risk is one of several tweaks Scalise, his colleagues, business interests and environmentalists will mull this year, in addition to ways to stabilize the marketplace and possibly entice private insurers to again offer flood policies.

Established in 1968 after Hurricane Betsy scared away private insurers, the NFIP allows property owners to buy financial protection against a so-called 100-year flood event, which has a 1 percent chance of happening in any given year.

However, the NFIP finds itself on shaky ground. Its accounts are $24.6 billion in arrears from massive payouts to victims of hurricanes Katrina and Rita in 2005 and Superstorm Sandy in 2012. Political fights in Congress let the program lapse 18 times before a major overhaul was finally agreed upon in June 2012.

The helicopter tour for the two congressmen coincided with several efforts this month to jump-start debate over what the next version of the NFIP should look like. Hearings have already begun in the House, and the Senate is expected to start its conversation this week.

© 2017 Florida Realtors - Reprinted with permission Florida Realtors. All rights reserved.

How will housing change over the next decade?

NEW YORK – March 7, 2017 – Your 10-year outlook: Expect business to get busier, but be ready for some major demographic shifts in housing.

Housing demand over the next decade will be significantly higher than today, predicts Lawrence Yun, chief economist of the National Association of Realtors® (NAR), in his latest column at Forbes.com. Rising populations and a growth in the job market likely will release a pent-up demand in housing over the next 10 years, he says.

The population is rising and more housing will be needed to meet demand, Yun says. About 325 million people currently live in the U.S., and population projections forecast a 27 million increase to 352 million in 10 years.

However, not all age groups are expected to see an increase: The number of young adults in their 20s is expected to drop, Yun says.

"This demographic are mostly renters, and hence, rental demand will flatline," Yun says. "Real estate investors should be mindful that even though there is good rent growth today, that certainly will not be the case in a few years, especially given the ramp-up in apartment construction over the past few years."

The ages predicted to see the strongest housing market activity over the next decade? Adults in their 30s and 40s. The population of people in their 30s is expected to grow by 5 million over the next decade, reaching 48 million. Yun says that 12 percent increase likely will lead to more first-time homebuyers. Plus, the number of Americans in their 40s will increase by 3 million, and he predicts they'll be looking to trade up in real estate as their finances improve.

On the other hand, the number of Americans in their 50s is forecast to drop by nearly 4 million, which could signal a lower demand for second homes, Yun adds.

Meanwhile, "those in their early 60s, before the commonly recognized retirement age of 65, are a stable bunch with no change in their number of the next decade," Yun writes. "The population of those aged 65 and over is rising big time: Expect an increase from the current 51 million to 69 million, a growth of 35 percent."

Housing demand in warm weather areas, and income tax-free states like Florida, Tennessee, and Texas are set to boom over the next decade, Yun says.

"Within reasonable parameters of economic growth and interest rate movements, home sales should do well over the next decade, clocking in at around 6 million a year," Yun says.

The national median home price likely will go from $234,000 in 2016 to $330,000 by 2027.

Source: "Housing Demand Over the Next Decade," Forbes.com (March 2, 2017)

© 2017 Florida Realtors
Reprinted with permission Florida Realtors. All rights reserved.

Florida property taxes average compared to other states

WASHINGTON – March 1, 2017 – The average American household spends $2,149 on real estate property taxes each year, plus another $402 for residents of the 27 states with vehicle property taxes. With such high costs, it's no surprise that about $11.8 billion in property taxes go unpaid each year, according to the National Tax Lien Association.

To determine who pays the most relative to their state, WalletHub, a personal-finance website created this 2017 Property Taxes by State report.

Overall, Florida ranks near the middle for property taxes – No. 27 out of 50 states – even though it's one of only a handful of states without a personal income tax. In addition, WalletHub looked at vehicle property taxes paid each year, and Florida is one of the 24 states that don't charge any vehicle tax.

• Real-estate property tax rank: No. 27
• Vehicle property tax rank: No. 1
• Real estate tax on median state home value: $1,686
• Real estate tax on median U.S. home value: $1,894
• Vehicle property tax on best-selling car: $0.00

© 2017 Florida Realtors
Reprinted with permission Florida Realtors. All rights reserved.