Mind on Money: Be vigilant when Florida property shopping

Sell or downsize the house in Indiana or Illinois, buy a condo in Florida and spend the brutal upper Midwest cold months in the sun.

AKA, become a snowbird. I’ve worked with clients who became visibly healthier in the winter months, as they would come in for their planning and review meetings during springtime after being gone for five months looking more fit, tan and relaxed. Florida for many represents the “good life”.

As the good life attracted more and more baby boomer retirees, whole communities sprung up, designed specifically for delivering on the American dream.

Of course, the iconic Villages in northern Florida is the highest profile example, but there are many other alternatives of the Villages concept around the state, as well as innumerable condo developments and even mobile home villages catering to the snowbird crowd. As it turns out, perhaps too many.

As a tropical paradise, Florida of course is prone to tropical weather, including tropical storms. Hurricanes and flooding have always shaped the landscape in Florida, even when the landscapes have been reshaped by human hands, as it turns out humans are a complicating factor.

In 1990 the population of Florida was around 13 million, in 2023 it was around 23 million, a near double. For comparison, Indiana’s population has grown about 20% in the same period (source: US Census).

With more people homesteading in the line of fire of hurricanes and tropical flooding, when these inevitable disasters strike more property damage also occurs, as recent severe, high profile hurricane landfalls near the popular snowbird areas of Fort Meyers (Ian) and Panama City (Michael) illustrate.

Like homeowners everywhere, when disasters cause property damage for Florida homeowners they call their insurance company. The combination of population density and the dark side of tropical weather has created an explosion of claims for the insurance companies operating in the state, with some estimates putting the losses from Hurricane Michael alone at nearly $120 billion (source: Reuters).

There were going to be consequences for these kinds of losses.

The consequences are starting to emerge as insurance companies are becoming quite demanding about the risks they will cover, and quite demanding about the cost of insuring these risks. But wait, there’s more.   

In 2021 near Miami a tragedy of a different stripe occurred when the 12 story Champlain Towers South condo complex literally collapsed, killing 98 people. This terrifying tragedy resulted of course in government investigations, with the critical findings emerging as essentially deferred maintenance in the concrete below the pool deck, which was structurally crumbling but not unknown to the home owner’s association (HOA) responsible for operating the building, along with construction practices not built to modern safety standards.

These findings resulted in the state of Florida requiring that HOA’s across the state inspect and correct their properties in an attempt to avoid future maintenance and construction related disasters.

The outcome of these seemingly unrelated but concurrent trends is the perfect storm for snowbirds. When the government or the insurance company requires an HOA to pull back the rug on a property complex, issues are going to be discovered, and with the Champlain tragedy as a backdrop, when issues are discovered they are going to need to be fixed. The result is cost increases, in some cases cost explosions in the American snowbird dream.

Some of our clients have been hit with HOA assessments of $150,000, others have seen their ownership costs in real estate that have been paid off for decades quadruple in cost between HOA dues and insurance. The dream of a Florida retirement is becoming no longer affordable or no longer worth it, many are attempting to throw in the towel.

Anyone who has ever driven to Miami or Naples knows Florida is a huge state, with a number of different regions and environments. While insurance costs have gone up across the board, not all Florida real estate is created the same. For anyone considering buying in the state, due diligence needs to be a critical part of the process going forward.

Before buying into any community subject to an HOA I recommend looking under every stone. It is appropriate to request property inspection or engineering studies, HOA meeting minutes, HOA financials, insurance policies and, if public, insurance company property evaluations. It will also be a good idea to get individual homeowners insurance quoted during the due diligence period as buyers will want to make sure a huge insurance increase isn’t poised to be levied.

A good realtor should be able to deliver these documents to buyers for review, and it is also appropriate for the buyer to contact an HOA directly to request these materials.   

After the due diligence documents are in hand, for buyers who don’t feel confident reviewing the materials should consider hiring an expert for help. In my recent experience, there is simply way a lot of risk with Florida real estate at this time, buyers can’t be diligent enough.