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Sinkholes thwart home sellers

Vinnie and Kim Stellato thought their three-bedroom house might quickly bring $90,000 in this hot real estate market.

That was before dozens of sinkholes opened up in the past week.

On Thursday, four days after Vinnie Stellato stumbled on a volleyball-sized hole in the yard, the Stellatos took their house off the market.

What's more, the Stellatos are now worried there might be a pit under their son's bedroom.

"Everything's on hold," said Kim Stellato, who had hoped to move with her husband and two sons to a bigger home in this western Hernando County community. "What do you tell people? "I might have a sinkhole, I might not. Thank you very much. I'll get back to you.'

"You know, who's going to buy my house now?" she asked. "I'm going to be stuck with this house. I'm not going to be able to move. We live on Swiss cheese."

While homeowners insurance policies in Florida must offer sinkhole coverage, the recent sinkhole phenomenon may wreak havoc for residents trying to sell homes, and for others who find themselves underinsured and, subsequently, out thousands of dollars.

Although sinkholes appear to be proliferating, real estate agents say residents throughout Spring Hill shouldn't worry. The threat of overall property values plummeting because of sinkholes remains small, they say.

"Other than the immediate house and some adjacent to it until it's repaired, the sinkhole is not going to affect the real estate market," said Teresa Sturgill, president of the Hernando County Association of Realtors.

However, because real estate agents must disclose to buyers if a sinkhole had been present, the price sometimes drops.

"Usually, because of disclosure, they can't get the ultimate price," she said. In some cases, the final price drops by about 10 percent from the original, she said.

Even if a house wasn't hit by a sinkhole, buyers might raise the issue in the future, said Gary Schraut, who runs Coldwell Banker Schraut & Associates in Hernando County.

"Are people going to come along and use it as a bargaining chip? I think so," he said. "But is it going to be effective? I don't think so."

That's because Spring Hill has become a seller's market, he added, thanks to a surge in buyers and burgeoning demand for resale property.

"We're going to have to see what plays out in the next 60 days, 90 days, 120 days," he said. "I think we'll be able to ride through this. This is one of those things that occurs in Florida, just like hurricanes and bad weather."

Others aren't so sure it is that random.

Bill Graf, new home representative for Cozy Homes, says that for years he has been steering people away from building in certain parts of Spring Hill.

The problem, he said, is the sinkholes, which form when the clay layer collapses into a vacant pocket in the limestone below.

He tells clients looking in Hernando County to stay about a half-mile north or at least two blocks south of Spring Hill Drive.

"If you come in here with your husband, the last thing I'm going to do is drive you down Mariner Boulevard," he said, referring to the area where most of the sinkholes recently developed.

Potential buyers should hire experts to perform ground-penetrating radar tests on property to see if it's prone to develop sinkholes, Graf said.

Builders and future homeowners also need to protect themselves by making sure the property insurance policy covers sinkholes during the construction phase, he said.

State law says companies offering property insurance must make sinkhole coverage available.

That would include the construction phase, as well as commercial property, said Steve Roddenberry, deputy director of insurer services in the Florida Department of Insurance. But during construction, those policies might not be as comprehensive as homeowners policies after the buyer moves in.

"If you have questions on whether your home is covered, call your agent," he advised.

Sometimes insurance companies step in before damage occurs, said Mike Trevino, spokesman for Allstate Insurance, the second-largest provider of homeowners insurance in Florida.

"If it's determined that there's a threat to a structure, then we'll step in and take remedial action," he said. "We'd rather spend the money to prevent the loss from occurring than to pay the ultimate loss expense."

The company pays up to the dollar limit chosen in the policy, he said. It's important for homeowners to update the market value on the cost to rebuild their house so they don't lose value when a sinkhole hits, he said.

Under-insurance was only one of many problems for Andrew Peterson.

Three years ago, a 150-foot-wide sinkhole swallowed the back of his Spring Hill electronics store on Linden Drive.

His property insurance did not include a separate rider for his commercial property. It also did not cover his land, which insurance experts say is common.

While he received partial reimbursements for some of the damage to his building and equipment, Peterson found potential sinkhole problems in the back of his lot. His insurance wouldn't cover that and he also wasn't able to expand his store as he wished.

Finally, he moved his business to another location after selling the lot and building for $48,000 _ down from the appraised value of $182,000.

"I learned a valuable lesson: If I'm going to build any kind of structure in the state of Florida, no matter where it is, I'll invest in ground penetrating radar," he said.

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