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Obam a signs law putting caps on flood insur ance incr eases By John Hielscher Published: Fr iday, Mar ch 21, 2014 at 3: 06 p.m.

Owners of second homes in Southwest Florida will face higher flood insurance premiums and surcharges than owner-occupied residences under new legislation that provides relief for flood-prone areas. But those increases could have been much steeper if Congress had not recently approved a significant scaling back of the much-criticized Biggert-Waters Flood I nsurance Reform Act of 2012. Primary homes got a boost from the legislation, which was signed into law by President Barack Obama on Friday, but vacation and second home owners also got a break from skyrocketing flood insurance costs. Potential increases to flood premiums — many in triple digits — threatened to undermine the region's real estate recovery by making insurance unaffordable for many owners and potential buyers in flood zones — even of properties not near significant bodies of water. Real estate agents and insurance sales officials alike applauded the anticipated changes for eliminating the uncertainty surrounding flood insurance hikes. “I t's been a guessing game, so we're all breathing easier,” said Lois Seropian, an agent with Coldwell Banker on Siesta Key. Sarasota insurance agent Rick Greene said second homes, as well as business properties, built before the flood maps were drawn in the 1970s may yet see up to 25 percent annual hikes in flood rates until they reach full-risk levels. “This is not always a fantastic increase,” Greene said. “For example, a home with property flood mitigation construction — 'smart vents' or similar construction that allows water to flow through and not against walls — or those elevated above the base flood elevation height might have a premium of about $400. A 25 percent increase is only going to be $100 or so each year.” The annual ceiling is 18 percent for owner-occupied homes. Second homes and business properties built after the flood maps also have a cap of 18 percent, he said. Primary homes, meanwhile, will pay a $25 annual surcharge to help replenish the National Flood I nsurance Program. Second homes and businesses will be hit with a $250 assessment. Florida has nearly 40 percent of the homes covered under the program, which is nearly $24 billion in the red. Caps on incr eases A key element in the new legislation repealed a provision in Biggert-Waters that, when property was sold, would have triggered much-higher “actuarially sound” rates.

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“I f you're going up a couple hundred percent, even a 1,000 percent increase, that's what really jolted people, scared people away,” said Dave Clapp, managing broker with Re/ Max Alliance Group in Sarasota. Those increases will now be capped at 15 percent for most primary residences and 25 percent for second homes or businesses, Clapp said. Those are maximums, he noted: Many owners will not see their premiums rise that much. Another provision of the new legislation mandates the government must conduct studies on finding a longer-term fix for the flood program within the next two years, he added. The cost of flood insurance has become a standard query for home shoppers on barrier islands, Coldwell Banker's Seropian said. While she hasn't had any deals fall through as a result of the potential increases, she agreed that gradual rate hikes and certainty regarding the process will bring increased stability to the market. “Since October we've been on pins and needles,” she said. “This will make people feel better.” Still, many buyers will not be affected by the new legislation. I n many flood-prone areas, especially on the barrier islands, for instance, buyers tend to pay cash for their homes and, as a result, choose to forego purchasing flood insurance. Many opt instead to self-insure by putting aside funds for potential damages. But mortgage lenders, by contrast, require their customers to carry flood insurance coverage if their homes are in flood zones. Cash buyers still account for a majority of single-family and condo sales throughout the region — 67 percent in Sarasota, 60 percent in Manatee and 88 percent in Charlotte counties in January, according to data provider RealtyTrac. I f the bill is signed into law, buyers of homes in flood zones will be able to assume the below-market insurance rates currently assessed under taxpayer-subsidized policies. Greene, of Southwest I nsurance Associates, said the perception that premiums will soar remains, however. He recalls that a Michigan couple that shopped for property here last summer has shelved their plans because of flood insurance concerns. “Not all rates are going crazy,” he said. “But yes, some are going to be a shock.” To mitigate that jolt, buyers need to be realistic about the hazards of acquiring waterfront or island properties and the costs of insurance, he said. “They may be surprised that the premiums are not $30,000 or $40,000, as the media has trumpeted, but are really quite reasonable, making the purchase of property now still a good investment,” he said. Copyright © 2014 HeraldTribune.com — All rights reserved. Restricted use only.

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