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50% FEMA RULE, WHY IS AN APPRAISAL NEEDED?

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Key Concepts:

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  • The National Flood Insurance Program (NFIP) is a federal law administered locally in communities that opt into the NFIP.

  • Independent appraisals are the best way to estimate the building value which is used in the 50% FEMA Rule determinations.

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Flooding in the streets

The appraisal report’s intended use is to support a building permit application subject to significant improvement/significant damage determination as part of the National Flood Insurance Program (NFIP).


One of the purposes of the NFIP is to reduce flood damage by limiting floodplain development. Development can be many things including building a structure, placing fill, digging a ditch, or installing a culvert. In some flood-prone areas, almost no development is permitted (think of the flow ways of rivers, creeks, and other drainage features), and in other flood zones, new development is regulated with minimum floor elevations and special design standards.


When a building located in a flood-prone area does not conform to minimum floor elevation or design standards, then the NFIP would prefer that the building be elevated to a level out of the floodplain or demolished and removed. Most property owners view that as an extreme position. To avoid litigation, and to seek a reasonable compromise between private and public interests, NFIP regulations provide for the continued use of nonconforming buildings by application of something commonly called the 50 Percent Rule.


Basically, the 50 Percent Rule means that when a building permit is required for repairs or improvements to a nonconforming structure, before issuing a permit the community must determine whether the cost of the proposed repairs or improvements is less than 50 percent of the building value. The person charged with making that determination is a floodplain administrator.
There is more than one way to develop the building value. Sometimes ad valorem assessment information, properly adjusted, can be used. The other way is to obtain an independent professional appraisal.


Local communities require building permit applicants with nonconforming buildings in the floodplain to submit a project budget detailing the project cost. The 50 percent rule determination is made by comparing the project budget with the building value and calculating the percentage.


The Substantial Improvement/Substantial Damage Desk Reference (the Desk Reference), published by FEMA as a guide to local floodplain administrators, says that appraisals prepared by a professional appraiser according to standard practices of the profession are the most accurate and reliable method for determining the NFIP “market value”.

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St. Petersburg, Florida 33702

(Phone): 813-803-6121

(Fax): 813.803.6122

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info@tampavaluation.com

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