FEMA Appraisals – What You Need to Know About the 50% Rule

Flooding… what a nightmare.

Damaged flooring, moldy drywall, soaked furniture, and many times personal loss. FEMA (Federal Emergency Management Agency) doesn’t like flood damage any more than you do. That is why, based on your elevation as recorded in periodically released flood maps, the government requires you to purchase flood insurance to protect your asset. For those in riskier flood zones, the cost is higher, as the odds of a claim are also higher.

Beyond cost, there is another consideration with either the purchase or remodel of a home in a flood zone: FEMA limits how much you can improve your home and the only what to know what that value is, is to get a FEMA appraisal from a certified appraiser. In a nutshell, any renovation is limited to half of the estimated depreciated cost to reconstruct the home. The two terms you need to know:

Replacement Cost: The cost to replace the property on the same premises with other property of comparable material and quality used for the same purpose utilizing modern building techniques in compliance with modern codes and methods.

Depreciated Replacement Cost: The replacement cost of a structure as a factor of the remainder of the structure’s economic life.

Here’s an example of how the math works:

A typical assumption for total economic life is 60-years.

If a home costs $100,000 to build brand new, and is 15 years old in mostly original condition, it has 75% of effective life remaining or a depreciated replacement cost of $75,000.

FEMA only allows 50% of this depreciated replacement cost to be used to improve a property, so in this example, your renovation would be limited to $37,500 ($75,000/2). Because County Records are assessed on using a technique called Mass Valuation, the governing body may  miss updating cost resulting from permitted renovations, they cannot provide the full picture of the depreciated cost replacement. This is where an independent appraisal can help.

Independent FEMA Appraisal

An independent FEMA appraisal takes into consideration the condition of your home and provides FEMA an updated cost replacement that will get a homeowner every valuable dollar they deserve under these guidelines. We are well experienced preparing FEMA reports on properties ranging from $100,000 to over $12,000,000. Feel free to call if you have questions or need help in this area. 239.206.3101.

City of Naples Flood Guidelines

Lee County Flood

Collier County Flood