What is a FEMA Appraisal?
The FEMA Appraisal Rule, Substantial Improvement Rule, Actual Cash Value, 50% Rule
The FEMA 50% Rule is often misunderstood. Many appraisers are not familiar with the requirements and what should and should not be in the appraisal. Municipalities in FEMA Flood Zones need to comply with the requirements. Many home owners and some developers only become familiar with the rule and requirements mid way through the project. I always recommend addressing this before submitting for permits.
So what is the FEMA 50% rule?
Well in a nutshell…….The maximum improvement that can be made to the property without having to meet the FEMA Flood plain criteria is 50% of the value of the improvements. In other words take a building having an actual cash value of $100,000. You could remodel it and spend up to $50,000 without having to meet the FEMA criteria. Each municipality has its own set of sub-rules that may trigger the need for a Actual Cash Value Appraisal once 40% is reached. You should check with your municipality.
You can look up the value of your home here:
https://www.miamidade.gov/Apps/PA/propertysearch/#/
How does the municipality determine the value of the improvements?
Typically the assessed value is a starting point. However, it is often much lower than the actual cash value. Many home owners and building owners appeal the assessed value of the properties. They argue that the buildings are not worth as much as the county indicates in order to minimize the real estate tax exposure. Well, when getting a permit most will argue that the value is much higher than reflected in the public records.
Hiring an appraiser…..
Many appraisers are qualified to prepare these types of appraisals. However, far to many times have I seen problems with appraisals or have been asked to step in and try and rectify the problem. Many appraisers are just not familiar with the FEMA guidelines or are aware that FEMA has a Substantial Improvement handbook. I recommend hiring an appraiser who has prepared these types of appraisals. Ask for examples of some of the projects they have been involved with. Ask them if they have attended any courses specific to this topic. The Appraisal Institute and FEMA both hold seminars on this topic. Feel free to call me with any questions or comments about a FEMA Appraisal or Substantial Improvement Appraisal.
I always recommend hiring an appraiser with a designation fro the Appraisals Institute or ASA.
Can I Use use purchase or refinance appraisals?
No unfortunately many property owners think they can use the report prepared for financing to overcome the FEMA 50% Rule. You need a specific appraisal of the improvements only. The report for financing address the market value of the subject. This is different form the Actual Cash value of the improvements. FEMA has a specific definition that must be included in order to make the report FEMA compliant. There are many other items that must be included and there are many items that can not be included.
Some of our recent projects include:
