Nobody told Rangel Dockery that flood insurance premiums for the St. Petersburg home she bought in June would skyrocket from $1,900 to nearly $14,000.
Ditto for Colin Elston, who bought his dream retirement home in Treasure Island that same month, and Penny Lee, who bought a cottage nestled inside a St. Pete Beach flood zone a year ago.
"There was no disclosure at all, or we never would have bought this house," Dockery said.
So who do home buyers blame for not telling them the feds were eliminating flood insurance subsidies for some homes starting this month? Or, as one audience member posed to boisterous enthusiasm at a recent flood insurance forum:
"Who do I sue?"
"The biggest injustice of this whole thing is for people to not have heard at all" that insurance subsidies were being stripped from homes sold after July 2012, said Tim Fellabaum, flood product manager for Bankers Insurance Group in St. Petersburg. "I fully anticipate somewhere down the line someone's going to sue their real estate agent and/or their insurance agent."
St. Petersburg real estate attorney Matt Weidner has already met with several property owners preparing to file suit, alleging their Realtors should have warned them their flood bills would soar.
"It's a known defect," Weidner said. "As professionals, they had an obligation to know when it was passed more than a year ago."
Weidner grants that it would have taken Realtors a few months after the passage of the Biggert-Waters Flood Insurance Reform Act in July 2012 to realize its flood rate implications — maybe as much as six months. But after that, failure to tell prospective buyers becomes deceptive, he said.
"There are going to be many, many Realtors who are going to pay the price," he said. "Their insurance carriers are going to be cutting checks to people who bought these homes."
John Sebree, senior vice president of public policy for the Florida Realtors, said his industry was "just as surprised by (the) rate increases as anyone."
"This is not what Congress sold to us," Sebree said in an email. Rather, he said, Biggert-Waters was "sold" as a five-year, phased-in increase in rates.
Sebree said he hasn't heard of any legal challenges. But he noted one line of defense: Realtors aren't the ones quoting flood insurance rates; that information comes from insurance agents.
"Hot potato," responded Jeff Grady, president and CEO of the Florida Association of Insurance Agents.
Grady said so far he has not received any complaints or heard of insurance agents facing lawsuits, which he thinks would be groundless anyway.
"I just don't think agents are going to be in that same line of fire," he said. "We're just placing coverage. The transaction in trying to buy the real estate has already taken place."
The source of the angst, the Biggert-Waters Act, was an attempt to keep the National Flood Insurance Program afloat by gradually — or in some cases immediately — ending subsidized rates. Older properties in flood zones that were built before flood maps were adopted in the 1970s and early 1980s have enjoyed lower rates for years because of the subsidies. Pinellas County alone has more than 50,000 subsidized policies, the most of any county nationwide; Hillsborough has more than 14,000.
Hardest hit are new buyers of those subsidized homes, property owners with repetitive claims and those who let their policies lapse. All are at risk to lose their subsidies immediately.
Darryl C. Wilson, a professor who specializes in property law at the Stetson University College of Law, maintains buyers of subsidized homes have "a very weak case" if they target their own real estate agent. Home buyers typically sue Realtors for shielding known physical defects of a property like a cracked foundation, not over the vagaries of shifting insurance rates, he said.
Some test cases aside, Wilson said the more likely scenario may be a class-action suit targeting "the deepest pockets" available, possibly the insurance industry.
Nicholas Ekonomides, a real estate attorney in Clearwater, agrees proving "intentional misrepresentation" by a Realtor may be tough, especially an agent selling a property. A buyers' agent, on the other hand, bears more responsibility to keep their client informed, he said.
Still, Ekonomides said, homeowners can contend the more pertinent issue is not what a real estate agent knew at the time of a sale but that they should have known that Biggert-Waters Act called for eliminating subsidies on all homes bought after July 2012.
"Ignorance is no excuse," Ekonomides said. "You're going to have lawsuits just as a practical matter."
For their part, Realtors are clinging to FEMA's persistent sketchiness about Biggert-Waters' impact, with the government holding off on releasing new rate figures until August, a full year after the law was passed.
Eileen Bedinghaus, a ReMax Realtor in St. Petersburg, said she tried to pass along information as she knew it. She was far ahead of most of her colleagues in alerting clients about the possibility of a substantial flood rate hike last spring.
The real estate community, though initially slow to react, has taken steps the past couple of months to shield itself and warn property owners.
The Florida Realtors this summer changed sales contracts to alert buyers they may need to get a flood certification to obtain flood insurance. By getting the certification, buyers should now know exactly how much their new premium will be.
The new contract language also makes a buyer's offer contingent on obtaining flood coverage by a certain date at a price not to exceed a cap that is written into the contract.
"If Realtors wait to educate themselves, it will be too late, and could lead to lawsuits and (Florida Real Estate Commission) complaints," attorney Joe R. Boyd, legal counsel to the Tallahassee Board of Realtors, warned in a blog post to members three weeks ago. "There is no reason to think this is just going to go away."
Some real estate agents said they thought the worst of the rate increases would never happen — that there would be another fix in Congress just like in previous times the National Flood Insurance Program faced a financial shortfall.
Even now, much of the emphasis from Tallahassee to Washington, D.C., has been on finding a legislative way to end or at least postpone the rate hikes, which took effect Oct. 1.
Washington's poisonous political climate, which culminated in the recent shutdown of the federal government over whether to fund Obamacare, makes the likelihood of a congressional flood fix even more remote.
That's one reason why Weidner, the local real estate attorney, thinks there will be plenty of disgruntled home buyers looking to sue.
"Anybody that is talking about some Washington solution to this is delusional," he said.
Jeff Harrington can be reached at [email protected] or (727) 893-8242.