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. All buildings which are located in flood zones and are not elevated to current Base Flood Elevation (BFE) fall under the 50% FEMA Rule.

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 structures in flood hazard areas.

Communities must require that all new construction and substantial improvements of residential and commercial structures 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.

As appraisers, we usually deal with existing property, and not with new construction, in regard to coastal management. Residential, commercial and industrial properties have to comply with FEMA rules and regulations, and therefore an appraiser can be faced with all kinds of different valuation problems.

The basic FEMA rule says:

If the cost of improvement and addition or the cost to repair exceeds 50% of the depreciated market value of the structure, it must be brought up to current floodplain management standards.

Cost of repair/renovation/addition                         >50%
Depreciated market value of structure

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 a building project for structures 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 the 50% threshold
  4. If necessary and possible adjust the cost to repair/renovate
  5. Contact the building department for a permit

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

Recommended Literature:

View Sample 50% FEMA Appraisal Report

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

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