50% FEMA Rule Appraisal


Facts About the 50% FEMA Rule

The 50% FEMA Rule Appraisal will determine the depreciated value of the construction or actual cash value (ACV). The local building departments will use the appraisal in the permitting process to determine if work on the property will be a substantial improvement or repair of substantial damage. All buildings which are located in flood zones and are not elevated to current Base Flood Elevation (BFE) might fall under the 50% FEMA Rule, depending on proposed improvements or required repairs.

The Federal Emergency Management Agency (FEMA) not only serves the public during and after disasters with response, recovery and financial aid, but is also the official source for flood hazard information in support of the National Flood Insurance Program (NFIP). The NFIP is administered by FEMA, and flood plain management establishes the minimum requirements for communities to apply development regulations for new and existing buildings in flood hazard areas.

Communities must require that all new construction and substantial improvements of residential and commercial buildings within flood zones A1-30, AE, AH, V1-30, V and VE on the community’s Flood Insurance Rate Map (FIRM) have the lowest floor (including basement) elevated to or above the Base Flood Elevation (BFE). Properties in V zones need to be erected on piles or columns, with the bottom of the lowest horizontal structural member of the lowest floor at or above the BFE. In Florida, the minimum elevation requirement established in the Florida Building Code is BFE plus 1 ft (many communities add even more).

As appraisers, we usually deal with existing property, and not with new construction. Residential, commercial and industrial properties have to comply with FEMA rules and regulations, and with state and local building codes and floodplain management regulations. Therefore, an appraiser can be faced with all kinds of different valuation problems.

The basic FEMA rule says:

If the cost of improvements (including additions) or if the cost to repair a building to its pre-damage condition equals or exceeds 50% of the market value of the building, the building must be brought up to current floodplain management standards.

Cost of repair/renovation/addition = under or over 50%
Depreciated Value of building

Affected projects can be voluntary, or necessary after a catastrophe (wind, flood, fire):

  • Remodeling
  • Rehabilitation
  • Building additions
  • Repair
  • Partial reconstruction

A property owner should plan building projects in flood zones carefully and in the following sequence:

  1. Contact a licensed contractor to estimate the cost for repair/renovation.
  2. Order a 50% FEMA appraisal from a licensed appraiser who specializes in 50% FEMA appraisals to establish the “Depreciated Value”.
  3. Apply the formula as shown above to see if cost of repair/renovation is under or over the 50% threshold and factor it into decisions.
  4. Contact the building department for a permit. The community will review cost estimates and market value appraisals and make the official determination.

Please contact us at any time with questions about FEMA rules and regulations and the 50% FEMA rule.

Recommended Literature:

FEMA P213. Answers to Questions about Substantial Improved/Substantially Damaged Buildings (2018)
www.fema.gov/media-library/assets/documents/169099

View Sample 50% FEMA Appraisal Report

Read Our Featured Article on the 50% FEMA Rule in The Appraisal Journal:

Excerpt from the Insider

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