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Storms can blow deals on homes

When tropical weather is on the horizon, insurers stop writing insurance policies. That can complicate a house sale. Citizens is the first to stall for Cindy.

By JEFF HARRINGTON
Published July 6, 2005

Nothing, it seems, can slow the torrid sales of Florida homes - not dwindling acreage nor the threat of rising interest rates nor soaring land prices.

Nothing, that is, except a tropical storm or two swirling nearby.

As Tropical Storm Cindy spun toward Louisiana, the possibility that it could strike the tip of Florida's Panhandle was enough to convince at least one major insurer to stop writing policies in Florida.

Citizens Property Insurance, the state-run insurer of last resort for anyone who cannot find property coverage, stopped binding policies throughout Florida at 7 a.m. Tuesday, citing the threat of Cindy. That means anyone counting on Citizens' coverage to close a sale or refinance is on hold.

The stoppage may be a quick one, ending after Cindy makes landfall. But Citizens and many more insurers are expected to stop writing again if Tropical Storm Dennis heads into the gulf this weekend as expected.

Most insurance companies won't write new homeowners' policies in the Tampa Bay area if hurricanes or tropical storms whirl into a wide zone that includes the Gulf of Mexico, Cuba and the Bahamas.

It can put a big damper on real estate closings.

"When you cancel a closing where you have willing parties ready to go to the table, it's a terrible thing," said Barry Flavin, who runs Florida operations for the Talon Group, a title insurer that typically handles about 2,000 closings a month statewide. Talon's parent company, First American, has up to 12,000 closings a month.

Most insurers aren't following the lead of Citizens, whose portfolio includes high-risk coastal properties that are viewed as most susceptible to wind damage. Flavin and other title companies say there's been minimal effect on closings being delayed.

But they urge home buyers and refinancers to be prepared as the storm season has become active sooner than usual this year.

"What we always encourage our clients to do this time of year is get that coverage bound a week or so before closing," said Bruce Tigert, president of Bayshore Title Insurance in Tampa.

Last year, some title insurance companies reported that property owners were forced to cancel or postpone roughly half the home sales and refinancings scheduled during a hurricane-crazed, six-week span.

The quick start to this season has caught some off guard.

Tuesday's emergence of Tropical Storm Dennis marks the earliest date to reach four named tropical storms in the Atlantic basin.

Because of the first storm, Tropical Storm Arlene, Citizens briefly stopped writing policies statewide between June 9 and 11.

Many insurers take a regional approach to not writing policies during an approaching storm, but Citizens spokesman Justin Glovers said that's not practical for his agency, which has 8,000 agents writing its policies spread across Florida compared with a few hundred for fellow large insurers.

With 740,000 homeowners policies as of the end of May, Citizens is the second-largest insurer in Florida behind State Farm.

Every time a closing is postponed, Flavin said, there's potential for headaches or scuttling a deal.

Buyers can lose a loan commitment or a promised interest rate on a loan. In some cases, buyers planning on immediate possession have a moving van ready to unload; any postponement quickly becomes costly.

One worst-case scenario that Flavin has seen is when a buyer has a car accident or a heart attack waiting for the closing.

"Next thing you know," he said, "the deal is gone."

Jeff Harrington can be reached at harrington@sptimes.com or 813 226-3407.

[Last modified July 6, 2005, 00:49:15]