Real Estate Blog

TALLAHASSEE, Fla. – Jan. 23, 2012 – An issue discussed at the recent Florida Realtors Mid-Winter Meetings appears resolved, at least for now. Citizen’s Property Insurance Corp. – the state-owned insurer of last resort – relied on a single vendor, 360Value, to estimate a building’s replacement costs that, in turn, impact the amount of property insurance an owner had to buy.

A number of Realtors and homeowners, however, felt that 360Value overestimated replacement costs, forcing owners to overpay for insurance. Consequently – and in response to criticism from Florida Realtors, homeowners, the media and others – Citizens says it will now consider other sources when calculating replacement cost, including other software firms, appraisers, contractors and more.

“Florida Realtors has followed Citizens’ actions closely, and we discussed replacement costs at the recent Mid-Winter Business Meetings,” says Florida Realtors Senior Vice President of Public Policy John Sebree. “This issue is important to Realtors, homeowners and buyers, and we’re pleased with Citizens’ decision to expand replacement cost appraisals.”

As a state-owned insurer, Citizens cannot raise rates beyond 10 percent per year; but critics of the replacement cost appraisals claimed Citizens found a way to raise rates by skirting the yearly cap – simply force policyholders to buy more coverage than needed.

In response, Citizens said that wasn’t true, and that replacement cost differs from market value. Buying a foreclosed home, for example, many times costs less than the money it would take to build that same home.

The problem started in late 2010 when Citizens started to use 360Value exclusively. Homeowners could not get alternative appraisals if they disagreed with the values released by the vendor. Effective now, however, Citizens will still use data from 360Value, but it will also accept the following to calculate replacement costs:

• Estimates from other vendors, such as MSB and e2Value

• An appraisal from someone licensed to estimate insurance reconstruction costs, which can be different than market value

• A general contractor, architect or engineer estimate, providing it includes a contract price for reconstruction and an itemized list of features in the home

• A property inspection report, providing it’s been conducted within the previous 12 months

Citizens officials have not said how they will deal with past problems, however. Some owners balked when their insurance premiums went up based on new and higher replacement cost estimates, but they continued to pay the higher premiums anyway. Under the updated rules, it’s not clear if Citizens will make a new estimate retroactive, and, if so, whether a property owner can expect reimbursement for premiums already paid.