Biggert-Waters could be catastrophic for

 island real estate

By Rick Catlin, Islander Reporter

Some island real estate agents and insurance brokers are hoping legislation introduced in Congress by U.S. Rep. Gus Bilirakis, R-Fla., to amend the Biggert-Waters flood insurance law will pass as quickly as possible.
Without any delay, the Biggert-Waters Act will be “catastrophic for the island,” said real estate agent Carmen Pedota of Big Fish Real Estate, 5351 Gulf Drive in Holmes Beach.
That’s because Biggert-Waters, which became effective Oct. 1, eliminates government subsidies for flood insurance and places the estimated cost of flood insurance in the hands of private actuaries working for the major insurance companies, she said.
“What this means is that flood insurance rates are going sky-high,” Pedota said.
She lost a sale earlier this month because the flood insurance premium jumped from $1,100 to $7,000.
“That made the buyer ineligible for the mortgage and the sale was lost,” she said.
Biggert-Waters is really going to affect the island’s real estate industry unless the Bilirakis legislation is enacted soon, she said.
Bilirakis has proposed a 10-year schedule to amend Biggert-Waters with a more equitable solution, rather than just immediate, drastic hikes in flood insurance, his office spokesperson said. The bill, HR 3312, was introduced in Congress two weeks ago.
Homes most affected by Biggert-Waters are those built before 1974, called “pre-firm” houses. In 1975, the Federal Emergency Management Authority called for new homes built in a high-hazard flood zone, such as Anna Maria Island, to have elevated living space.
When a pre-firm house is purchased, the flood insurance rates will skyrocket for the buyer, Pedota said.
“Homes that are elevated won’t be affected as much, but there will be some impact on the flood insurance premiums for these houses,” she said.
Exactly how much the effect will be is unknown, Pedota said.
“This whole bill is extremely complicated and difficult to understand. It is really going to affect our business,” she said.
Robin Kollar of Gulf-Bay Realty, 5309 Gulf Drive, Holmes Beach, said she had not yet had any issues with Biggert-Waters.
“But it’s really going to affect the sale of a pre-firm house,” she said. “It will definitely adversely impact my business, and the entire island real estate industry.”
Kollar said buyers who pay cash will have an advantage as they can choose to “take a chance” and not purchase flood insurance.
Unfortunately, she said, the middle income buyers who need a mortgage will feel the impact.
“And it’s not just flood insurance. I understand wind insurance rates are also going up,” Kollar said.
But she can see the other side of the issue. FEMA’s Community Rating System, which determines the flood insurance subsidy the government provides to municipal property owners, is $18 billion in debt.
“Obviously, something has to be done,” said Wayne Scroggins of Scroggins Insurance, 6505 Cortez Road W., Bradenton.
“But Biggert-Waters is extremely complicated. I’m taking online classes on the act and I’m sure many other agents also are taking the classes,” he said.
Scroggins, who has had his own agency for more than 30 years, said the full impact of Biggert-Waters is still not known by the insurance sales industry.
“It’s complicated, I can tell you that. If someone has to get a mortgage, getting the insurance premium rate is difficult and they are going to go way up, especially if the home is in a high-hazard flood area,” he said.
Pedota said homes purchased prior to July 1, 2012, won’t see the same flood insurance premium impact as those bought after that date. “They will be much higher,” if purchased after that date, she said.
Elevated homes built after 1975 will be affected the least as long as they are occupied full-time, she said. Second homes and vacation rental properties will see the largest premium increases, Scroggins said.
Pedota said the big increase in flood insurance premiums comes when someone sells a home. The buyer is going to be hit with the new flood insurance rates and that’s going to knock many of them out of the purchase,” Pedota said.
Cash buyers will realize they are in a good position and will demand a discounted price on a home, she predicted.
But for vacation rental property owners, the effect of Biggert-Waters could force them out of business, or to sell their properties, said insurance agent Kim Brito of Academy Insurance in Bradenton.
“We insure one guy who is retired and owns seven rentals. He lives on that income. He asked me what’s going to happen to him when his flood insurance premiums become so high, he can’t make it back with a higher rent. I had no answer,” Brito said.
Brito also is taking classes on Biggert-Waters.
Even the co-sponsor of the Biggert-Waters Act, Judy Biggert, R.-Ill., said she never intended the act to adversely affect the real estate industry of those people living in high-hazard flood areas.
In an online statement, Biggert and co-sponsor Maxine Waters, D-Calif., said there have been unintended consequences to the act.
Pedota said the real impact of Biggert-Waters on the island will probably be seen this winter season, when buyers become serious about investing in island property and apply for a mortgage. The high cost of flood insurance may disqualify many potential buyers, she said.
“We can only hope Bilirakis can get his legislation through quickly. This whole thing just hit so suddenly, and nobody realized what was going to happen.”
Even island building officials who supervise the CRS program are unsure of the effects of Biggert-Waters on Anna Maria Island.
Building official Steve Gilbert of Bradenton Beach said the act “could mean the end of Anna Maria Island.” Anna Maria building official Bob Welch said Biggert-Waters is “complicated” to understand.
An aide at Bilirakis’ Washington office said the Homeowners Flood Insurance Relief Act brought by Bilirakis will be pushed as “fast as possible,” through the maze of congressional committees and compromises.

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