Is sinkhole damage sinking Tampa Bay property values?

In Residential Blog Posts by John Topa

Is sinkhole damage sinking Tampa Bay property values?

By Susan Taylor Martin, Tampa Bay Times Senior Correspondent

On a scale of desirability, the house for sale on Whittner Drive in Land O’ Lakes would rank fairly low. It’s a short sale; it sits on an unstabilized sinkhole and it’s within a few miles of two houses that collapsed into a gargantuan hole July 14.

The asking price is $250,000, but the seller will be lucky to get half that. As for homes much closer to the Great Pasco County Sinkhole, “I don’t think anybody is going to sell anything for several months,” lawyer and real estate broker David Walkowiak predicts. “To say a sinkhole negatively affects value is an understatement — it devastates the value of a house.” 

Yet in Hernando County — which once had more sinkhole claims than any other place in Florida —buyers are snapping up sinkhole houses for as much as $300,000. That’s because Hernando’s supply of homes for sale is “so ridiculously low there are few houses to choose from if buyers want to move here,” Realtor Gail Spada says. 

Along with Pinellas and Hillsborough counties, Hernando and Pasco make up a big part of Florida’s notorious Sinkhole Alley. The threat of sinkhole damage haunts thousands of Tampa Bay homes, occasionally bursting into reality with disastrous results as seen this month in Pasco and in 2013 when a sinkhole opened under a Hillsborough house and swallowed a man asleep in his bedroom. 

Jeffrey Bush’s body was never found. 

There is no question that sinkholes can depress property values and hurt sales although the proximity in time and place to a major sinkhole can aggravate or lessen the economic damage. It will be almost impossible to unload a home close to the Pasco sinkhole in the near future. Meanwhile, houses are selling well in Hernando, where there hasn’t been a catastrophic sinkhole since one gobbled up a TV repair shop 20 years ago. 

Still, the fact that one of the destroyed Pasco homes had a supposedly repaired sinkhole is worrisome to officials throughout Tampa Bay. 

“We’re certainly monitoring the situation,” says Warren Weathers, Hillsborough County’s chief deputy property appraiser. 

The Pasco house had been pinned — a process in which steel piers anchor the perimeter of a house to bedrock. Pinning is cheaper but considered less effective than grouting, which fills in voids beneath the house and keeps it from collapsing into the hole. 

“Pinning without addressing the subsurface with grouting is worthless,” says Nicholas Albergo, a professional engineer in Tampa who serves as a court-appointed mediator in disputes over sinkhole claims. 

Pasco County Property Appraiser Gary Joiner is among those who wonder if the definition of “repaired sinkhole” needs to be revised.

“Once this is all said and done, we’re going to sit down with our top staff and go over it with engineers,” he says. “I’m in a sinkhole house myself — there are 32 or 33 pins — and it made me think about my own house now. I thought I was safe.”

The problems with Joiner’s New Port Richey home started several years ago with a small crack in the kitchen tile that eventually extended from the front to the back of the house. “You could have run a quarter all the way through it,” he says. “Then we noticed the window and doors didn’t open.”

Because of his own experience, one the of the first things Joiner did when he became property appraiser in January was revamp the agency’s web site and list all 9,291 Pasco parcels with sinkhole or subsidence activity. Home buyers can search by address, property type and area. (In Land O’ Lakes, site of this month’s giant sinkhole, 335 homes have shown evidence of problems.)

“We did want the public to be able, if searching for a new home, to know what they’re getting into,” Joiner says. “I never thought about sinkholes when buying a home but I do now. If I move again I would do my homework to make sure there’s not a sinkhole.” 

If you’re Tampa Bay homeowner with a sinkhole, or evidence of one, your property likely will be appraised lower — good for tax purposes; perhaps not so good when it comes time to sell. 

In Pasco, Joiner’s office reduces the value of homes with unrepaired sinkholes by 50 percent and those with repaired holes by about 5 percent. In Hillsborough, which has 2,100 problematic parcels, the reduction is up to 65 percent for unrepaired sinkholes and 10 percent for repaired ones. In Pinellas, with about 2,500 parcels, adjustments are on a case-by-case basis. 

Hernando, with nearly 9,000 reported sinkholes, recently had to tweak its formula.

Sale prices in the county have increased so much in the past year that even some houses with unrepaired sinkholes fetch surprising sums. Property Appraiser John Emerson’s office used to reduce the value of unrepaired homes by 50 percent and repaired ones by 10 percent. 

“But based on a combination of the market getting stronger and people for whatever reason paying more for these unrepaired homes, it’s now 40 percent for unrepaired and 5 percent for repaired,” Emerson said. 

There is no better example of how perceptions, and values, of sinkhole homes can change than Pristine Place. 

A gated community in Hernando’s Spring Hill area, Pristine Place has spacious, attractive homes susceptible to sinkholes — not the headline-grabbing monsters that devour homes but “subsidences” that crack walls and pool decks. By 2012, nearly a third of the 673 houses in Pristine Place had documented sinkhole damage, the highest concentration in Hernando, which had the highest concentration in all of Florida.

The reason: Scores of Pristine Place homeowners had discovered it was relatively easy to get insurers to pay $100,000 or more for sinkhole repairs with no requirement that the repairs actually be made. In a rush to cash in before the law changed in 2011, many homeowners filed claims. Some made repairs. Others used the money to put in pools, send the kids to college or pay off their mortgages. 

By 2012, the lingering effects of the recession and Pristine Place’s reputation as sinkhole central had driven down the median sale price to $131,000.

Fast forward to 2017. 

In the last six months, 22 homes have sold in Pristine Place. Ten of those had repaired sinkholes and sold for a median of $242,000 — $27,000 more than the median price of houses in the neighborhood without sinkholes. 

Randall Raymunt looked at 25 houses before settling on a three-bedroom, two bath sinkhole home in Pristine Place this spring. He paid the full asking price of $195,000. 

“Sinkholes are not unique. I live in Illinois and we just had a big storm come through and it caused a hole,” says Raymunt, an insurance company analyst who plans to retire to Florida in a few years. “I just feel more comfortable in that the house had a sinkhole engineer and repairs that have been done.”

Spada, a Spring Hill Realtor, knows that sinkholes scare off some house hunters. 

“But the majority of buyers are OK with it as long as we have access to the investigative reports as well as full documentation for the repairs or remediation,” she says. “We have not run into any problems with getting insurance or having buyers move forward.”

Under Florida law, a seller must tell the buyer before closing if a sinkhole claim has been made on the property and if the full amount of the proceeds was use to repair the damage. 

The Hernando property appraiser’s office doesn’t consider a sinkhole house “repaired” unless both the structure and the hole itself have been stabilized. In Hillsborough, where the 2013 death by sinkhole caused international shock, members of the property appraiser’s staff met Thursday to discuss what happened in Land O’ Lakes and whether it was an unavoidable “freak of nature” or the result of an improper repair.

One option being considered: State-hired inspectors or engineers could sample houses with repaired sinkholes to see if the work was correctly done. During the frenzy to file claims before the law tightened in 2011, numerous sinkhole repair firms sprang up, eager to share in the huge amount of money insurers were doling out. Homeowners accused some firms of sloppy work or doing no work at all.

“I would recommend that the state do (the sampling) because sinkholes are a multi-county problem,” says Weathers, Hillsborough’s deputy chief appraiser. “If they find out that one out of five or one out of 10 was done improperly, there is a serious problem.”

While property appraisers take sinkhole activity into account in setting values, Weathers notes that the real estate market ultimately determines what homes in sinkhole-prone areas are worth.

“After about seven to 10 years, the stigma disappears if there are not any scary stories,” he says. Given Florida’s geology, though, there’s always the potential for more calamities like those in Pasco and Hillsborough.

“If you look at a map of Spring Hill to Carrollwood, all those lakes will pop out at you — they are sinkholes,” Weathers says. “Nature has made a whole swath of those beautiful lakes. There’s beauty but there are also beasts.”