3 Risks of Buying on Barrier Islands

Buying on Florida’s Barrier Islands: Real Risks You Can’t Ignore

What Actually Breaks Deals in Florida

Insurance and Carrying Costs

The problem lies in the elevated insurance premiums required for properties in flood-prone zones like AE and VE. The Florida Office of Insurance Regulation mandates that properties in these areas have specific flood insurance, often leading to unexpected costs. In one deal, a buyer was blindsided by a $10,000 annual premium, discovered only during the underwriting process, forcing them to renegotiate their offer or walk away. This can lead to contract termination if not addressed early.

We had a great recommendation for Mike Renick and Eric even before we were in the Sarasota area from a former client of his summering in Baltimore whom we happen to meet. When we decided to actively start looking for a place in the Sarasota area, I spoke to Mike over the phone and he was truly courteous and welcoming. When we came down in person, he first took the time to get to know my wife and I personally to better gauge what would work best for us. Since we had limited time, he was unsparing of his own time to efficiently but thoroughly show us the inventory that would work best for us. He patiently explained the pricing rational and the factors that go into these considerations. He helped us through the closing procedures and assisted us in issues such as homeowners and flood insurance. The bottom line– we bought a place that was utterly perfect for us due to his extraordinary effort. We met Eric toward the end of our process, as he was on vacation initially, but I could readily see he is a man of great knowledge and integrity and capability, as was Mike. I highly and without any reservation recommend Mike and Eric to anyone in the market for Sarasota area real estate. You will not be disappointed!

– Ronald ginsberg, Google Review

Condo and HOA Approvals

HOA and condo association approvals can be a major hurdle. Florida Statute 718 governs these associations, and their strict rules can delay or even kill deals. I once had a client whose purchase was delayed by three weeks because the condo association required additional documentation, leading to a missed closing date and potential loss of their deposit. The consequence is often a forced renegotiation or contract termination.

Evacuation and Infrastructure Challenges

Overdevelopment on barrier islands has led to clogged evacuation routes, especially during hurricane season. This is not just an inconvenience; it can be a deal-breaker. During Hurricane Ian, many properties on Sanibel Island were left inaccessible, highlighting the risks of buying in these areas. Buyers often find themselves facing appraisal gaps and insurance denials when these issues are discovered too late.

Where It Usually Blows Up

The most brutal timing for these issues to surface is during the final stages of underwriting. At this point, buyers have already invested time and money into the deal, and discovering a problem can lead to significant financial losses. For example, if an insurance binder is denied just days before closing, the buyer may have to scramble to find alternative coverage at a much higher rate, or risk losing their deposit. This stage is critical because it often leaves buyers with little leverage to renegotiate or back out without severe penalties.

Purchasing a home can be a time-consuming and stressful venture: visiting prospective homes; identifying the pros and cons of each property; deciding which properties are right for you; final visit at these properties; making an offer (and counteroffer); dealing with the Sellers realtor; reviewing the Agreement For Sale; finding an attorney; finding a home inspection company; and acquiring home and flood insurance. Then the difficult task starts, working with a bank and filling out all the paperwork (Ugh!). Mike and Eric were very helpful throughout the process and kept us informed of our requirements and responsibilities for each deadline.

– bshea20047, Zillow Review

What I Tell Clients Before They Risk Money

1. Verify Insurance Costs Early: Request a detailed insurance quote during the inspection period.
2. Understand HOA Rules: Review HOA or condo association documents for any restrictions or additional costs.
3. Check Flood Zone Designations: Pull flood zone maps from the county office to understand potential risks.
4. Plan for Evacuation: Consider the logistics of evacuation routes and infrastructure in the event of a storm.
5. Review Building Codes: Ensure compliance with local building codes to avoid costly renovations or fines.

Questions Clients Actually Ask

What are the insurance requirements for barrier island properties?

Insurance requirements for barrier island properties often include both wind and flood coverage due to their high-risk locations. The Florida Office of Insurance Regulation and Citizens Property Insurance Corporation typically require these policies, which can significantly increase carrying costs.

How do HOA rules affect property purchases?

HOA rules can impose restrictions on rentals, renovations, and even the color of your home. Florida Statute 718 governs these associations, and failing to comply can lead to fines or even legal action, impacting both your finances and your ability to sell the property later.

What To Do Right Now

Request a comprehensive insurance quote and flood zone map from your county office before making an offer. This will give you a clear picture of the potential costs and risks involved in purchasing a property on a barrier island.

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To learn more about Michael and Team Renick:

https://www.teamrenick.com/

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To read more about what Michael shares with his clients:

https://blog.teamrenick.com/