WEEKI WACHEE — A half dozen years ago, Tampa financial adviser John Parrott invested in a duplex and quickly turned a profit by reselling.
"I made $15,000,'' he said. "I thought, hey, this was easy money and I enjoy working with my hands and fixing places up.''
Parrott was hooked on flipping.
In 2005, he tried to do it again with a multistory waterfront home in Weeki Wachee Gardens.
What he didn't know was the home's history. Strong winds and full moons could bring water into the yard and bottom floor. Real storms did far worse.
He spent long hours and $25,000 to fix the property, then put it up for sale. But there was no buyer. As time passed and the property sat vacant, the mortgage payments became overwhelming. Parrott refinanced. He slapped a lower price on the home, and still no buyer emerged.
Parrott was drowning in the debt and didn't know where to turn when he got a reprieve from an unexpected source: the Hernando County Emergency Management Department.
Just before Christmas 2007, Hernando County closed on Parrott's waterfront home, paying $490,000 for the wet white elephant and averting an impending foreclosure. Local firefighters were allowed to train in the building, a rare chance to run rescue drills in a multistory building.
Then Hernando County razed the structure for another $14,000.
Local builder Steve Costa was incensed when he heard about the deal from a friend in the fire department. He said he was even angrier when he learned that the county paid far more for the home than Parrott did and $214,000 more than the home's market value.
Costa said the owner was taking unfair advantage of a program offered through the Federal Emergency Management Agency.
"He found a loophole in FEMA,'' Costa said. "It's such a waste of taxpayers' dollars.''
Emergency management director Tom Leto sees it differently.
The federal program that made the home purchase possible is a partnership between FEMA and the National Flood Insurance Program, and this was the first Hernando County property to benefit. The insurance program is taking an aggressive tack, targeting properties with repeated flood insurance claims. Grants are given to purchase the properties and clear them back to a natural state, with a promise to never develop them again.
Reducing the county's potential for insurance claims is Leto's job. The better he does, the more he saves FEMA and the lower the cost of flood insurance for everyone at risk in Hernando County.
"For (Parrott), it was a great way for him to get out from his burden of debt, and he knows he made a bad investment,'' Leto said. "Our goal was to get the site cleared so that we didn't have continued flood claims — to stop this madness.''
"April 2005,'' Parrott said. "It was the beginning of the end.''
Parrott, 45, had found the home and several other properties through a broker. When he visited the home at 5291 Tropical Point, he was assured that it didn't flood. The water around the edges of the house — it never got in. The sump pump out front — he wouldn't need it.
"The bottom line: The person who sold me the house must have seen 'naive' stamped on my forehead,'' Parrott said.
He never pulled the property card at the county Property Appraiser's Office, where he would have seen that the previous owner had gotten permits to repair damage after the 1993 no-name storm and again three years later when Tropical Storm Josephine hit the coast.
He was told that he would pay about $1,200 in flood insurance. When the bill came, it was more like $3,800. A year later, it had climbed to $7,000, Parrott said. He found himself trying to track down a former owner to see if he could get enough information about the past flooding to get some kind of break on the cost of insurance.
Parrott had high hopes for his house flip.
The $449,500 he paid seemed like a good investment. He said he hoped to turn it around quickly and maybe make a profit of $20,000.
Shortly after his purchase and repairs, Parrott placed it on the market for $575,000. By the time he was done with refinancing months later, he had dropped the price to $415,000.
Then he became aware of the federal purchase program and applied.
The process to get the grant stretched from March 2006 until December 2007. At some point, Parrott had almost given up hope it was going to happen, and he resigned himself to his pending foreclosure.
Word of the final foreclosure judgment came Dec. 4, 2007. Less than three weeks later, the county closed on the property, and the foreclosure was vacated in early January, according to court records.
"It was a short sale,'' Parrott said.
His primary mortgage holder got its money back, but the secondary holder had to take a loss. He walked away with nothing.
"It's not like I bought a boat or took a trip,'' he said.
Parrott did take home a lesson learned about real estate investing.
"I'm an honest person, and I've got to tell you, this was probably the dumbest thing that I've ever done,'' he said. "I had no idea it was in a floodplain, and I had no idea where to go look.''
Leto's parting e-mail to Parrott after the county made the purchase urged Parrott to be sure to contact emergency management officials in the next place he decides to buy property.
Parrott said it won't be here.
"I'm not interested in Hernando County,'' he said.
Hey, no fair
Costa, of Sunrise Homes in Hernando Beach, knows plenty of people who wish they too could find a sweet deal to get out from under a bad investment decision. He has little sympathy for Parrott's plight and likes it even less that the government saved him.
"There are a lot of people out there who need to be bailed out,'' he said. "Just because he made a bad investment, it doesn't make it my problem. My taxpayer's money is supposed to bail out your sorry a--?''
Leto says, "I don't look at it as a government bailout. We're just encouraging people to mitigate the hazards to their homes."
If houses with repeated flood claims continue to change hands, "then more unsuspecting homeowners will buy these homes,'' he said.
The reason FEMA and the flood insurance program are getting aggressive about repeat flood claims on the same property is that these properties make up a disproportionate amount of claims. Only 1 percent of policies are written on repetitive-loss properties, yet before Hurricane Katrina they produced one-third of all claims.
"We must do our part to mitigate the risk,'' Leto said.
A bonus of the purchases is that they show Hernando County's tenacity at reducing flood-claim risks. That gives the county extra-credit points for its flood insurance rating. The lower the rating, the higher the premium discount the federal flood insurance program offers county residents.
With new flood maps under development and a prediction that many more Hernando properties will need flood insurance after those are finalized, Leto said the discounts are more important than ever.
Leto's department is also aggressive about making sure that people know about grant programs that can help them make their property safer.
In Hernando County, there are 135 properties with repetitive flood claims, and county emergency management officials notify the owners each year that various federal programs can help them elevate, move, demolish or rebuild their homes — or that the government can acquire them as it did the Parrott property.
Parrott learned of the grant program from the letter sent out by emergency management in 2006.
Leto said he understands that some people might have a problem with the county paying more than the $276,000 market value of Parrott's property, but the federal program is clear. Homeowners are entitled to the fair market value at the time they file their application. Parrott filed at the peak of the boom.
"It was a lucky situation for him,'' Leto said. "Timing is everything.''
Still, Leto said that the county pushed for another appraisal when the one Parrott sought seemed too high. Leto said he wanted Parrott to get a fair amount, according to the rules of the grant, but "we didn't want him to leave with money in his pocket.''
Barbara Behrendt can be reached
or (352) 848-1434.