April 4, 2013 Florida Real Estate Commission Division of Real Estate 400 West Robinson Street, N801 Orlando, Florida 32801 Dear Members of the Real Estate Commission, Sinkhole damage has cost Florida insurers billions of dollars in property insurance claims. With recent changes to FL insurance laws, we believe that going forward these costs will be borne by homeowners and their lenders. The Florida Real Estate Commission needs to look at amending the rules for Florida Real Estate Brokers and Sales Associates to include providing sinkhole reports to their clients. The following is my research and reasoning behind requesting this commission to go further; to require sinkhole information be addressed by the real estate community. Florida, because of its karst terrain, is more susceptible to sinkholes than other states. The ground composition sets the stage for sinkholes to occur in large numbers making it very dangerous. Sinkholes are a costly and frequent hazard to properties in Florida. There are currently no guidelines for real estate professionals to disclose to a potential buyer if sinkholes affect a property. Sinkhole information is a vital piece of looking at a property in its entirety. Home buyers want to know if a property they are potentially purchasing could be affected by sinkholes. They also want to be able to consider the costs of adding sinkhole insurance to their homeowner’s insurance policy. Real estate professionals by definition are “advises, counsels, consults or analyzes in connection with the acquisition or sale of real estate by an entity if the purpose of the entity is investment in real estate…” i Real estate professionals are also tasked with providing advice and direction regarding real estate values, and information about a neighborhood. Homeowners and buyers should know the risks, dangers and the potential for having to purchase insurance based on sinkhole exposure. Homeowners are left to pay for damages themselves if they do not purchase the correct insurance. “Florida has more sinkholes than any other state in the nation. Florida law requires authorized insurers to cover ‘catastrophic ground cover collapse,’ but damage caused by a sinkhole may not be covered by your policy. That’s because the law defines catastrophic ground cover collapse differently from sinkholes…All insurance companies licensed to do business must offer sinkhole coverage, usually as an addendum or rider to an existing policy, and for an additional premium charge.” ii However, sinkhole insurance costs are skyrocketing, and coverage is becoming difficult to obtain. Consider this story: “Ron Woods of Hudson considers himself lucky. He notices a 2‐foot‐wide sinkhole forming outside his Beacon Woods home last summer, six months before his new policy takes effect in February. His new deductible will soar from $2,500 to $28,500. That’s on top of a 14 percent increase in sinkhole premiums.” iii “In sinkhole‐prone counties, the rate increases foreshadow what will likely be several years of continued annual price hikes of 50 percent or more. Citizens’ data indicates that average sinkhole premiums in Pasco County need to rise from current rates of $1,379 to about $9,650 to be financially sound.” iv The rising premiums are caused by the massive amounts of claims and payouts due to sinkhole damage. “The Office of Insurance Regulation report showed the total cost of the nearly 25,000 claims from 2006 to 2010 reached $1.4 billion. The average payout for a ground collapse was close to $150,000. Sen. Garrett Richter, a sponsor of the sinkhole insurance legislation on the Senate side, said insurance companies are at risk of going under because of the sinkhole claims.” v By requiring real estate professionals to provide sinkhole information, homebuyers can be more aware of the overall value, and additional costs, be it repair or insurance protection on a property. Sinkholes will not stop occurring, however, if real estate professionals are able to provide information about the risk to homeowners and buyers they will be more informed of their purchasing decision and will be able to take the correct steps to prepare for a possible sinkhole disaster. If real estate professionals are helping determine the value of a property be it to sell or purchase, wouldn’t it make sense to look at sinkholes as a potential influence on the value of a property? “[R]eal estate agents generally do a competitive market analysis to establish a selling price for a home. A competitive market analysis (CMA) is the estimation of the value of a property by comparing it to similar properties in the same area that have been recently sold.” vi The value of the land decreases based on the makeup of the soil an improvement it has been built on. The value of the entire property will be reduced based on the potential risk of a sinkhole. So why aren’t sinkholes currently required to be noted in a Florida CMA or real estate report to determine value? If the information about sinkholes is accessible, why are real estate brokers and agents not including it? The resources for sinkhole research have been limited in the past. However, this is changing. The Florida Geological Survey has a database of sinkholes; it is limited to only 3,400 sinkholes. “The Florida Geological Survey maintains and provides a downloadable database of reported subsidence incidents statewide. While this data may include some true sinkholes, the majority of the incidents have not been field‐checked and the cause of the subsidence is not verified.” vii In addition, each county has records as well, but they are often hard to search through and not updated regularly. There is now a comprehensive source for sinkhole data, FloodInsights, which provides reports (Appendix I) of verified sinkholes and subsidence events in relation to a property address from a database of over 15,500 records (Appendix II.) “…researchers have determined that sinkhole collapse is more likely in locations where many sinkholes already exist.” viii FloodInsights gives Florida real estate agents and professionals access to the information about where previous sinkholes have been recorded. Therefore we should take advantage of this available data and move towards protecting the citizens of Florida by ensuring them access to the most information they can regarding their property or investment. The main reason sinkholes should be researched by real estate professionals is to protect Florida citizens that are buying a home. Here is another example: “Michael Garfield did not know a thing about sinkholes when he moved to Florida from Boston a decade ago, but his knowledge of Earth's depressions shifted in a hurry when he came to Oviedo. Forced into foreclosure because of a sinkhole that affected his home, the street he was living on and two other houses in his gated community in Aloma Woods, Garfield now rents a house two blocks away and is readying for a remediation hearing in court.” ix The Florida Association of Realtors has taken a preliminary step forward in adding the Sinkhole Disclosure form to closing documents. However this form does not go far enough to cover the issue at hand that is affecting and will affect tens of thousands of Florida residents. A seller only has to disclose what they know, check a yes or a no box regarding known sinkhole activity. Therefore the research to understand the truth about the sinkhole risk to a property may not be discovered until after a catastrophic event has occurred. It is terrible to think that a new homeowner who has just invested their life savings into a property could see it destroyed overnight. This might happen because a real estate professional did not conduct their due diligence in finding out this pertinent information about sinkholes for their client. Real estate professionals, while they are not environmental experts, nor do we expect that of them, are trusted by homebuyers to help in finding a property that is right for them. To provide home buyers with information about value, direct them to home inspectors and appraisers for additional information about the house and the structure. So why would a real estate professional not want to include sinkhole information? Sinkhole reports can be a piece in their tool box to creating and maintaining a good and trusting relationship with a home buyer. Real estate professionals should be encouraging buyers to know as much as they can about a property before using their life savings to purchase a home. In Florida, sinkholes have inundated the state, and this information should be included in the documents that real estate professionals report to their clients. Real estate professionals do not want to go beyond the scope of their job or requirements. They are more scared of killing a deal than protecting their clients. The commission must enact new legislation to have real estate professionals not centrally focus on a deal or a contract but also focus on the client themselves. With your help we need to move towards real estate professionals providing all the information they can to a perspective buyer including sinkhole information. Let’s take a step forward and start better protecting and informing Floridians by requiring Florida real estate agents and brokers include sinkhole reports as part of the research they provide for their clients on a property. I would like the Florida Real Estate Commission to add a law to the regulations for Florida Real Estate Professionals to include sinkhole research as part of the real estate process. Thank you so much for your consideration on this matter. Sincerely, Hallie Benjamin 857.246.6659 [email protected] Appendix I: FloodInsights Sample Sinkhole Report FloodInsights' test results for :
14101 FALDO CT, HUDSON,FL 34667
Geocoding Accuracy: S8 (Most Accurate) - single valid address match, point
located at a single known address point candidate (Parcel)
Flood Zone Determinations
Test Description
SFHA (Flood Zone)
Within 250 feet of multiple flood zones?
Out
No
Zone Community Community Name
Panel Panel Date
X
0185D September 30, 1992 OUT
120230
UNINCORPORATED AREA
FIPS Code
Census Tract
12101
0312.05
Cobra Map Number
Sinkhole
1202300185D
Test Description
Distance to Closest Sinkhole
Within 0.1 mi
Ref_Num
Date
2367_1476
09/23/2003
2367_1447
06/25/2004
2367_1451
02/08/2006
2367_1440
12/13/2006
2367_1474
11/06/2007
2367_4865
07/29/2008
2367_1473
11/06/2009
2367_1439
12/01/2009
C_2606
03/17/2011
C_2620
06/09/2011
14/88/2010
10/15/2010
10/09/2010
07/15/2010
15/98/2008
11/04/2008
02/78/2008
02/22/2008
08/23/2011
05/27/2011
61//7344
03/17/2011
49//7415
06/09/2011
133 sinkholes were found within 0.50 miles
466 sinkholes were found within 1.00 miles
1.31
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Appendix II: FloodInsights Florida Sinkhole Coverage Map
Images of Florida Sinkholes Sinkhole swallows Home in Florida (2011) x Marion County Sinkhole on Farm (2012) xi xii Sinkhole in Tampa swallows Car (2010) xiii i
http://www.oregonlaws.org/glossary/definition/professional_real_estate_activity ii http://www.myfloridacfo.com/consumers/guides/property/sinkholes.htm
iii http://www.tampabay.com/news/business/banking/citizens‐homeowners‐face‐soaring‐deductibles‐for‐sinkhole‐
repairs/1271353 iv http://www.tampabay.com/news/business/citizens‐sinkhole‐coverage‐could‐rise‐by‐50‐percent‐in‐tampa‐bay‐
area/1242674 v http://www.foxnews.com/politics/2011/04/19/florida‐lawmakers‐consider‐insurance‐bailout‐spike‐sinkhole‐claims/
vi
http://thismatter.com/money/real‐estate/real‐estate‐appraisal.htm vii http://www.dep.state.fl.us/geology/feedback/faq.htm viii ASSESSING SINKHOLE SUBSIDENCE HAZARD IN LIMESTONE TERRAIN; Sinkhole Brochure, 2007
ix http://www.seminolechronicle.com/vnews/display.v/ART/2013/01/17/50f8029779afd?in_archive=1
x http://www.theepochtimes.com/n2/science/sinkholes‐recent‐sinkholes‐and‐why‐they‐form‐photos‐59451.html
xi http://www.saveoursuwannee.org/wp‐content/uploads/2012/07/home_ph1_BIG.jpg
xii http://www.dep.state.fl.us/geology/gisdatamaps/images/ocala_farm_sink_lg.jpg
xiii http://www.examiner.com/article/florida‐sinkhole‐swallows‐car‐keeps‐growing‐photo‐video