By: Joseph E. Seagle, Esq. President of PCS Title
October 19, 2021
Hello, and thanks for stopping by. Today, we touch on some real estate issues that most of us never hear about and hope it strikes up some conversations.
970 words…4 mins 51 secs
1 Big Thing: Flood insurance rates rising to match reality
Flood insurance, provided by independent and large corporate homeowner insurance agents, is actually backed by the National Flood Insurance Program which, in turn, is backed by … the US taxpayer. Rates have been held artificially low by underwriting standards that don’t account for climate change and the severe flooding that has been occurring for the past decade.
State of Play: Flood insurance rates traditionally are based on the property’s elevation and flood zone only, and the National Flood Insurance Program is $20 billion in debt. The FEMA “Risk Rating 2.0 Program” went into effect on October 1 for all new policies, and any policies renewing on or after April 1, 2022.
- Now, other factors like vicinity of a water source such as rivers and oceans, the cost to rebuild, and elevation are playing a part in setting rates for each property’s flood insurance premium.
- More than 1 million Florida flood insurance policies alone are expected to spike by double digits, some as much as 45%, this year per the Citrus County Chronicle because of leftover increases caused by recent hurricane losses. Even more are going to see higher boosts next year when renewals come due.
- But Congress capped annual increases for each homeowner at 18% for those who already have a policy in place. However, there is already wrangling among Congressional members who say that is still too high. So this too could change … again.
- Home buyers rushed to close on new homes before the rates increased as much as 15 times higher than they were for the seller, per NPR.
Between the lines: The new policy brings more equity to the program where now those with more-expensive homes will be responsible for bearing a more equitable share of the premiums to cover rebuilding costs in relation to those with less-expensive homes. Also, current policy holders can still assign their policies to their buyers, retaining that current lower (grandfathered) rate for the new buyer at least until renewal time rolls around. For those buyers who are assigned flood insurance policies from sellers, the Congressionally-mandated caps may protect them from the full increase they would have experienced should they have to buy a brand new policy.
Bottom line: If you’re selling or buying a home located in a flood-prone area, talk to your agent early about assigning your flood insurance policy to make the home more affordable. Those buying a home in a flood-prone area should make flood insurance quotes a part of their due diligence during the inspection period. Otherwise, many first-time homebuyers may be priced out of homes located in flood-prone areas altogether.
2: Miami-Dade New Rules for Septic Tank Disclosures
If you’re buying or selling a property in Miami-Dade County, and it has a septic tank, you have some new rules to follow.
State of Play: Miami-Dade Code Section 21-49.1, as of July 30, 2021, requires the seller of a property containing or serviced by a septic tank system disclose it to a prospective buyer before signing a purchase contract.
- The disclosure must be in at least 12-point type on a separate piece of paper, signed and dated by the purchaser, saying:
SEPTIC TANK SYSTEM DISCLOSURE: LAND INVOLVED IN THIS TRANSACTION HAS A SEPTIC TANK SYSTEM INSTALLED ON IT OR IS SERVICED BY A SEPTIC TANK SYSTEM. SEPTIC TANK SYSTEMS MAY BE SUBJECT TO LOCAL, STATE, AND FEDERAL REGULATIONS. IMPROPERLY MAINTAINED SEPTIC TANK SYSTEMS MAY POSE SUBSTANTIAL RISKS TO HUMAN HEALTH AND THE ENVIRONMENT. IT IS RECOMMENDED THAT THE PURCHASER OF THIS LAND CONSIDER OBTAINING AN INSPECTION OF THE SEPTIC TANK SYSTEM BY A QUALIFIED PROFESSIONAL.
- An acknowledgement must be included on the face of the deed or other conveyance instrument (i.e. an agreement for deed or land contract) that says:
I HEREBY CERTIFY THAT I HAVE READ, UNDERSTOOD, AND SIGNED THE SEPTIC TANK SYSTEM DISCLOSURE STATEMENT FOR THE CONVEYANCE OF THIS REAL PROPERTY, AS REQUIRED BY SECTION 21-49.1 OF THE CODE OF MIAMI-DADE COUNTY, FLORIDA.
- The purchaser must sign and have their signature notarized on the acknowledgment that appears on the deed for it to be recorded.
- This is rare, because the buyer never has had to also sign a Florida deed in the past for recording purposes. This may be the first instance in the state where this is required.
The Kicker — Penalty per violation: None. Initially the penalty was set at $1,000.00, but the Board removed that. However, if such disclosure is not made and properly acknowledged, a buyer could conceivably sue a seller for failure to disclose a material fact about the property if the existence of a septic tank is not disclosed elsewhere. The ordinance itself says that it shall not create a private cause of action against a seller if it is violated.
Bottom line: The ordinance appears to apply only to sellers; not their agents or brokers. And it has no teeth. The standard FAR Residential Property Disclosure already has a section related to disclosures about septic tanks. At best, for commercial properties where caveat emptor still rules, it could be argued that it creates an affirmative requirement that a seller disclose the septic tank’s existence.
3: October is Cybersecurity Awareness Month
Title agencies, buyers, sellers, lenders, REALTORs, and everyone else in the real estate closing transaction, are potential targets for phishing, SMIshing, vishing, and every other “-shing” you can think of as hackers and ransomware bots work harder and harder to intercept the flow of money in the transaction.
- We are always training to stay ahead of the latest threats, but everyone is better when we are all better at spotting and avoiding cyber threats.
- The Fed’s CISA, has great resources about cybersecurity to help everyone … even those not in real estate. Hurry over and check them out so you can “Do your part. #BeCyberSmart.”
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