There’s big news coming out of Florida this week about phony real estate values (again): a big lawsuit has been filed claiming that Citizens Property Insurance Company has been inflating real estate values in the replacement value of homes so they can charge the Florida homeowner higher insurance premiums.
The Florida Association for Insurance Reform (FAIR) filed the lawsuit against Citizens, which is Florida’s biggest property insurer. According to FAIR, Citizens didn’t even bother with evildoing appraisers and appraisal fraudsters: nope. They went very high tech, 21st century and used appraisal software to boost values on Florida real estate.
It’s really bad. An 82-year-old Florida woman, Ruth Lauro, has been used as an example: her home is valued at $50,000; however, her insurance premium through Citizens had it valued at $129,000. Mrs. Lauro is one of the plaintiffs in the new lawsuit.
As the Wall Street Journal reports, Citizens is a big money-maker: last year, Florida’s Big Kahuna of home insurance was adding 4000 new policyholders to its rolls each month. That’s a lot of revenue, especially for a company that is supposed to be in business to protect homeowners from the dangers of devastation here in hurricane-prone Florida.
In fact, according to the WSJ, Citizens Property Insurance Corp. has 1.5 million policyholders with a total exposure in the event of a major disaster of $511 billion; the WSJ’s numbers show Citizen has cornered around 25% of the home insurance market.
Here in Florida, our communities are often the target of powerful hurricanes. Hurricanes pose different kinds of damage to homes: wind, flood and flying debris. Damage that is covered by home insurance policies.
A while back, independent insurance companies balked at continuing to provide insurance coverage here because the risk for damage was so high. When devastating storms occurred, insurance companies were at risk of being forced out of business, bankrupted by the claims amounts that they must pay. Our state government on occasion had to step into the money gap, and cover claims that the insurance company pockets didn’t have. Unfortunately, homeowners were at risk of having an insurance policy that wasn’t worth the paper that it was written on (to quote the old saying).
Remember Hurricane Andrew? Back in 1992, that one storm was so huge that many insurance companies didn’t want to provide coverage here in Florida any more because they didn’t want to bear the risk of another Andrew-like storm on their books.
Which means that Florida (and the Texas Gulf Coast, the California Earthquake zone, etc.) have higher insurance premiums than other parts of the country. But that doesn’t mean that an insurance company can use that risk analysis to gouge its customers.
Appraisal fraud? Citizens may well argue that it’s just a software glitch (the software company is another defendant in the case). It’s not fraud if Citizens had no intent to do bad things.
However, oops! in this instance does not mean that a legal wrong has not occurred. Appraiser error or appraiser mistake – whether by a human, a man or woman licensed as an appraiser in the State of Florida or a software package designed to automatically spit out appraisals – can be the basis for the home owner to file a lawsuit for damages.
Appraisal negligence has been running rampant here in the State of Florida. The fact that Citizens has now been sued for appraisal error (whether fraud or negligence) is not surprising.
For more on appraisal negligence and appraisal fraud, read our previous posts on the topic. And if you believe that you may be a victim of a form of a phony appraisal, then consider your legal options with an experienced Florida real estate attorney. Florida law may be able to help you fix that bad appraisal.
If you have questions or comments, please feel free to Chat with Larry in the comments below, at firstname.lastname@example.org or (954) 458-8655.
Hi Larry. I put an offer on a traditional sale home with the contigency of a property appraisal. We negoiated the price of $135,000, cash within 24 hours of my initial offer. They were ready to sell, I was ready to purchase.
I received the appraisal which came in at $130,000. I asked my realtor what she thought, she felt the owner needs to come down to $130000. I agreed, and told her to let them know.
That was about 11 am, last week on Thursday, Oct 4th. As fast as the negioation went, I head nothing all day. My realtor called late in the day, 6 or 7 pm. She had not heard yes or no but said the owners realtor felt it wouldn’t be a problem. The two realtors decided that owners realtor would write the addendum up, get signatures, then I would sign. We had an appointment at 2 on Friday to look at some furniture they were selling. I asked my realtor why don’t I sign when we meet at the house, she said she wanted to make sure to get a copy with signatures.
Next moning, friday oct 5, the day Im supposed to look at owners furniture for purchase, I didn’t hear anything until 11:14 am. The appraisor called me.
She said she had made a mistake on the appraisal, she put a $7000 on a comp, and her 40 year old eyes say 7000, but the real number was $700. The bottom line for the apprasial is $135,000. She said the realtor for the OWNER called her last night and pointed out the error. She would redo the appraisal.
I told my realtor I would go no furthur until I had that appraisal. I had that about 5 minutes after I hung up. It was about 12:45 pm, and my realtor called, we talked about the appraisal, shesaid the owners realtor called the appraiser and since I had given my permission to share the appraisal, she (the owners realtor) could talk to the appraiser.
So I find it too calculating that the appraisal was redone to come in at exactly the sale price.
My realtor wanted to know if I was moving forward, I told her that I would but I would be contacting an attorney.
We had to hand up to make the 2:00 appointment with the owners for the furniture, and the last thing my realtor said to me was, the owners know nothing about this. Al is very sick and having a hard time selling his car, his home and moving.
So the owners never received my new offer on the selling price.
I want the house, even at $135,000, but this looks like fraud to me.
Thank you for your time.