There is nothing necassarily wrong with buying a repaired sinkhole home assuming that all proper documentation is available and you as the buyer or someone representing you on your behalf has perfomed some proper due dilligence. Typically a repaired sink hole property vs a property that has not been ever had a history of a known sinkhole will have about a 7%-10% market differential in terms of potential sales price. Of course there are always some exceptions to the typical norm, so the best course of action would be to have an agent do some research on the immediate market area typically a 2-5 mile radius to determine if there are similarly repaired homes which has sold and then compare thos to homes that have sold without a repaired sink hole. That will give you a good idea of how to value the property and what a reasonable offer should be.
There are other factors to consider as well, such as insurability. Most insurance in Florida will be through Citizens, the state run insurance company of last resort. Citizens has some very particular requirements with respect to re-insuring or insuring a repaired sink hole property. Essentially you will need to knwo the following in order to determine if Citizens will insure it.
1) Was the prior sink hole claim that was paid at or above policy limits? If so forget about Ctizens
2) You will need the original Engineering Findings Report (the report used to determine the sinkhole)
3) The Engineering Completion Report (The report documenting the repairs) Citizens will want to see that the repairs performed match to the recomendations depicted in the original findings report.
4) You will also need to be able to document evidence of the Cosmetic defects being repaired as well.
Citizens will review all items that your agent supplies and then determine if they will or will not ensure it. That is a process that can take a few weeks or longer. More than likely they will not insure for sinkhole again with respect to the added sink hole coverage, however their standard policy covers any catastrophic losses as a result of a catastrophic loss. Note: I believe there are 4 corners of a claim for catastrophic loss which need to me met, and most claims will probably not meet them all. So its probably a policy that would give you a warm and fuzzy feeling of protection, but unless something significant happes and the home is also deemed unsafe to occuppy by the county or condemned it will most likely not be enough to envoke that portion of the coverage. The likelyhood of something that significant happening are also probably very low at least statisically speaking.
Many times Citizens will not insure these for one reason or another. In those cases a suprlus lines Carrier such as LLoyds of London will insure it without issue. Typically LLoyds will have an exclusion for any sink hole related coverage in the policy. Also expect that this type of policy will be more expensive than a Citizens Policy. There are some items that LLoyds will cover that Citizens would not, such a screened enclosures and other structures, and their are some items that Citizens would cover where LLoyds would not such as catastrophic loss due to sinkhole. Each policy will have its trade offs, so you will have to determine as the buyer which is more important than which.
Most repaired sink hole properties if done by a reputable repair company will carry some sort of warranty as well. There are many buyers who feel that assuming they have a good warranty the added sinkhole coverage is not needed and there are those who would disagree. Its ultimately up to you to determine your own comfort levels as to what you are and are not ok with.
Recently there seems to be a more hightened level of education on the part of buyers and as someone mentioned there are those buyers who feelt if the property has been identified as a sinkhole and has been properly remeidated than that is a safer bet than buying a home which may be an unknown and then hoping the insurance carrier will cover it. Another big factor to this is also that Citizens has been very aggressive in its attempts to eliminate added sink hole coverages both legislatively and also with premium increases. This added coverage has gone up significantly in cost and it seems every year Citizens is seeking very large increases for the added sinkhole premiums. The last go around they sought nearly a 2,000% increase in some counties, altough that was recieved with much resistance and they did not have the request granted they did still recieve approval for a 33% increase wich is substantial. As a result there are many who feel that eventually, and probably sooner rather than later this extra sinkhole coverage will either become unavailable or simply unafforable. If that were to happen then a repaired sink hole property would become far more attractive. Hope that helps!
Insurance companies (and mortgage) will likely want to see the original drilling report, the repair report, proof or cosmetic repairs, the date and amount of loss and the declaration page from when the claim was filed.
Let me know if you need any assistance.
With any real estate purchase it is crucial to understand your short and long term objectives.
For instance, if you are looking for 'cash flow' opportunities, a remediated 'sink hole' represents an INCREDIBLE opportunity! I MAY cash flow INSTANTLY. Having well defined exit strategies before making such a purchase is always advisable to avoid getting 'stuck".
This may not be the best choice for the home you want to continuously live in for the next 60 years. It may not even a good choice if you foresee the need to sell in the next 15 years.
Need to finance the purchase? Forget about it!
You've got to see trough all the vitriol and hyped emotion and evaluate what works for your situation and your goals.
Regarding documents, you can be certain you will be buying the home 'AS IS' with NO assurances of any kind. The remediation docs, if you get a chance to read them, only document what has been done. What happens tomorrow will be on your dime.
This IS a high risk investment and should only be considered by those who have the experience and resources to adjust to present and future circumstances.
Best of success to you,
Annette Lawrence, Broker/Associate
Remax Realtec Group, Palm Harbor, FL
First Look: http://youtu.be/PumYpkgybXE
As a Florida Mortgage Broker / Investor with Civil Engineer friends who specialize in Sink Holes all over central FL, I know the financing, the real estate and engineering end of it, so believe that my advice of.....DO NOT BUY A SINK HOLE HOME should be taken!
You can show all the proof that the structure has been pinned, grouted, whatever, that property is and will always be a Ford Pinto!
You buy real estate for the potential appreciation. There are too many other properties available to be chasing after a sink hole home!
DONâ€™T DO IT, YOUâ€™LL BE SORRY IF YOU DO!
Pro Option Mortgage/ Florida
Ph: 888 662 4404
Prior Service U.S. Marine Corps
Not every lender will finance repaired sinkholes. However there are many local lenders who have mastered the process. Have your lender in place before offering on a house.
There are docs that insurance agents ask for if you decide to try to obtain a policy through Citizens. You need pre and post engineer reports, was there a full claim paid and evidence of claim also cosmetic repairs completed. Again do your homework and get local insurance agent who understands the process. You will find its likes swimming upstream only to find a higher premium for less coverage. We find many of our customers just cut straight through to Lloyds of London. We have also heard they have better coverage for only a slightly higher premium.
And again too stress make sure the repair matches the recommended repair, If they wanted Grouting, make sure it was Grouted and Not underpinned, insurance companies will still consider and underpinned home an unrepaires sinkhole basically because the hole is still there. again Steve and Tina I could not have said it better!
Bill Moffitt, Keller Williams Rewalty
Mortgage Broker responds:
Like Dr. Evil said to Goldfinger in the Austin Powers movie...."How'Bout Noooooooo!!! lol
NO...NO...NO...do not buy a Sink Hole nightmare! Talk about always having a huge black cloud over you! Fast forward 10 yrs and try being the seller of a sink hole home!
Contact me as I have a unique perspective on this subject that very few have concerning Sink Holes.