|FEMA Appraisal Questions & Answers
What is the FEMA 50 percent rule?
Along US coastlines and in federally designated flood zones, there are numerous structures con-structed directly on the ground, before elevation of structures in these areas was required. Such structures vary in age, condition, elevation, and construction quality. The Federal Emergency Management Agency (FEMA) regulations pro-vide that for these structures if the cost of improvements or the cost to repair equals or exceeds 50% of the depreciated value of the structure, the property must be brought up to current floodplain management standards. This provision is referred to as “the 50% FEMA Rule.” This rule gives property owners an understand-ing of how much money they are allowed to spend to improve or repair a property without elevating or otherwise bringing the structure into compliance with current FEMA standards. Therefore, an owner wishing to make improve-ments or repairs to a structure that does not comply with FEMA requirements must ascertain the value of the building.
A FEMA-related appraisal is not a simple undertaking. It requires extensive knowledge, not only of FEMA and the regulations it sets forth, but also of construction methods and materials, and local construction markets. This article will discuss the 50% FEMA Rule appraisal and associated FEMA regulations in general. It also explores different valuation methods and their appropriateness, establishes the required contents of a 50% FEMA Rule appraisal, and gives insight into professional issues that may arise in completing these assignments.
Does flood zone affect a FEMA Appraisal?
Yes, it will lower the value vis-a-vie other homes not in a flood zone simply because the operating expenses of your property will include the cost of flood insurance. ... The answer about value, is no, it will not be the same. You need to discover when your property was declared in a flood zone.
What does substantial improvement mean?
Substantial improvement” means any reconstruction, rehabilitation, addition or other improvement to a structure, the total cost of which equals or exceeds 50 percent of the market value of the structure before the start of construction of the improvement.
Can you build in a flood zone?
Zone AE means our land has a 1% probability of flooding every year. That means we are considered at high risk of flooding under the National Flood Insurance Program. We would have to buy flood insurance. ... If the land is above flood level already, but the map doesn't show it, you can get a Letter of Map Amendment (LOMA).
An area designated AE presents a 1 percent annual chance of flooding. ... Because flood zone AE is prone to flood, property owners with mortgages from federally regulated lenders in these zones must buy flood insurance if they live in a community that participates in the National Flood Insurance Program (NFIP).
What does it mean if a house is in a flood zone?
Flood insurance is required for some homeowners. For properties in high-risk areas, all federal or federally insured lenders require that the homeowner purchase flood insurance pursuant to federal law. ... The owners FEMA map can be used to look up whether an address resides in a flood zone.
Can you build in a regulatory floodway?
During the planning phase of any construction project, it is imperative to verify if a project is located within an area identified as a regulated floodway or floodplain as defined by the Federal Emergency Management Agency (FEMA).
Most construction activities within a regulated floodway or floodplain require coordination with FEMA and the local Floodplain Administrator (FPA). These activities include new building construction, existing building expansion, clearing land, placing fill, grading land, mining, dredging, drilling, placement of mobile homes, and more.
Many developers are often surprised to learn that coordination with FEMA is necessary even for excavations in the floodplain or floodway. If proper coordination and permitting have not been completed, then more issues can await during construction.
Floodways vs. Floodplains
FEMA defines a Regulatory Floodway as the channel of a river or other watercourse and the adjacent land areas that must be reserved in order to discharge the base flood without cumulatively increasing the water surface elevation more than a designated height. Communities must regulate development in these floodways to ensure that there are no increases in upstream or downstream flood elevations due to construction activities.
Floodplains are recognized on the FEMA’s Flood Insurance Rate Maps (FIRMs) as Special Flood Hazard Areas (SFHAs). SFHAs are defined as the area that will be inundated by a flood event having a 1-percent chance of being equaled or exceeded in any given year. The 1-percent annual chance flood is also referred to as the base flood or 100-Year Flood.
SFHAs are labeled as Zone A, Zone AO, Zone AH, Zones A1-A30, Zone AE, Zone A99, Zone AR, Zone AR/AE, Zone AR/AO, Zone AR/A1-A30, Zone AR/A, Zone V, Zone VE, and Zones V1-V30.
Moderate flood hazard areas, labeled Zone B or Zone X (shaded) are also shown on the FIRM, and are the areas between the limits of the base flood and the 0.2-percent annual chance (or 500-year) flood. The areas of minimal flood hazard, which are the areas outside the SFHA and higher than the elevation of the 0.2 percent annual chance, are labeled Zone C or Zone X (unshaded).
What is a FEMA floodplain?
Definitions of FEMA Flood Zone Designations. Flood zones are geographic areas that the FEMA has defined according to varying levels of flood risk. These zones are depicted on a community's Flood Insurance Rate Map (FIRM) or Flood Hazard Boundary Map.
Do you live in a flood zone?
Find Your Flood Insurance Rate Map (FIRM) If what you find at Flood Tools has you concerned, go to the FEMA website and enter your address to see whether your house is in a designated flood hazard area.
What is effective Lomr?
A Letter of Map Revision (LOMR) is FEMA's modification to an effective Flood Insurance Rate Map (FIRM), or Flood Boundary and Floodway Map (FBFM), or both.
What does floodway zone AE mean?
Any project in a floodway must be reviewed to determine if the project will increase flood heights. An engineering analysis must be conducted before a permit can be issued. The community's permit file must have a record of the results of this analysis, which can be in the form of a No-rise Certification. This No-rise Certification must be supported by technical data and signed by a registered professional engineer. The supporting technical data should be based on the standard step-backwater computer model used to develop the 100-year floodway shown on the Flood Insurance Rate Map (FIRM) or Flood Boundary and Floodway Map (FBFM).
Zone AE are areas that have a 1% probability of flooding every year (also known as the "100-year floodplain"), and where predicted flood water elevations above mean sea level have been established. Properties in Zone AE are considered to be at high risk of flooding under the National Flood Insurance Program (NFIP).
What is a substantial improvement?
Any reconstruction, rehabilitation, addition, or other improvement of a structure, the cost of which equals or exceeds 50 percent of the market value of the structure before the "start of construction" of the improvement. This term includes structures which have incurred "substantial damage," regardless of the actual repair work performed. The term does not, however, include either:
Any project for improvement of a structure to correct existing violations of state or local health, sanitary, or safety code specifications which have been identified by the local code enforcement official and which are the minimum necessary to assure safe living conditions or
Any alterations of a "historic structure," provided that the alteration will not preclude the structure's continued designation as a "historic structure."
Floodplain management requirements for new construction apply to substantial improvements. Increased Cost of Compliance (ICC) coverage does not apply to substantial improvements unless a structure is substantially damaged due to flooding.
What does it mean when your house is in a flood zone?
If you are considering purchasing a home located in a flood zone, you may also have to purchase flood insurance in addition to home-owner's insurance. Depending on the area, this can be quite expensive. If you have an agent, they can look up that information for you as well. Or you can search the city website for the FEMA flood zone.
An appraisal is a complete market analysis of a property, supported by recent sales located in the subject’s market area. The appraisal is prepared for a variety of uses by a professional appraiser who is regulated by the State and the Federal Government. Stringent educational and experience requirement are mandated for appraisers. State Registered appraisers are required to maintain continuing education in their field of expertise.
What does an Appraisal Report Contain?
All appraisal reports, prepared by a State Registered Appraiser, have minimum report requirements as mandated by the State and Federal Government. The required list of appraisal components is extensive.
How are appraisers Registered/Certified?
The professional appraiser is regulated by both the State Professional Regulatory Agencies and Federally Mandated Guidelines (FIREA).
The individual state, where the appraiser practices, has specific requirements for becoming licensed or certified. To become a Licensed Appraiser, extensive experience (while under a mentor) is required. Extensive educational course work is also required. To become a Certified Appraiser, the requirements are even more stringent with increased educational and experience requirements.
There are stringent ethical constraints on appraisers. The primary responsibility of the professional appraiser is to his/her client. The client is usually the person/company who hires the appraiser. The professional appraiser has a responsibility to the client to confidentiality. If the homeowner requests a copy of the appraisal from the appraiser, the appraiser will tell the homeowner that he/she must obtain a copy of the appraisal from the client. We are NOT allowed by law, to provide a copy of the appraisal to anyone except the client regardless of who or how the appraisal fee was paid.
There are many constraints on the professional appraiser that the typical client or homeowner would never see. Things like continuing education, reporting requirements, confidentiality, standards and other rules and regulations.
An appraiser can NEVER take an assignment that is predicated on the appraiser estimating the value of a property on a pre-determined value requirement. An appraiser MUST estimate the value of property based on sound appraisal principles.
Appraisal Terms and Jargon:
The property being appraised.
The property (dwelling and land). Any items which are physically attached to the dwelling become real property if their removal will adversely affect the property.
Fair Market Value:
An estimate of value predicated on the most probable price that a willing seller and buyer would negotiate for a specific property. This is the definition that is used for most appraisals. One specific deviation from this is an insurance appraisal where the improvements are valued on a replacement cost basis, and the land value is excluded.
Personal Property which is not included in the valuation.
The physical inspection (interior and exterior) of the property being appraised by the appraiser.
A property which the appraiser selects that has physical and locational similarity to the subject. The properties which have the most physical and locational similarity will be used as direct comparables in the appraisal report.
The exterior dimensions of the dwelling which are being used as living area. Garages, porches, other areas which are not living area, are not included in living area calculations but classified separately.
Items within the dwelling which are in need of repair. Items which are very minor will usually not be included. Those items which would be required to be repaired by a typical lender are classified as deferred maintenance.
Multiple Listing Service (provided by the local Realtor Association) is the most useful database that the appraiser uses to find comparable properties.
The County Records Systems provides helpful information about previous sales of the subject property, physical characteristics, tax information, flood hazard area information, etc. Both the subject and comparable properties information is collected from the public records databases.< /o:p>
The wasting away of the dwelling as a result of natural physical factors (weather, decay, insects, etc).
Loss in value to a property as a result of poor function (room layout, etc.).
The diminishing of the value of the subject property by factors outside the boundary of the property (high noise, smoke, traffic, etc.).
An Appraisal Contains:
An Appraisal is an analysis based on STATE REQUIRED components which must be included in every appraisal prepared by a State Licensed Appraiser. An appraisal is well documented and will serve to support a value conclusion in many different uses. An appraisal is prepared by a state registered appraiser who is highly regulated in experience and training.
Why hire a Technically Advanced Appraiser?
As in any profession, the people working in that discipline vary tremendously. They are the young upstart professional who uses every gadget available. He has the latest computer, the latest field aids (measuring devices, cameras, etc), and all sorts of technical gadgets.
If you can find an appraiser who has a lot of experience AND also has a lot of technical aids, you have found someone that will be the most proficient professional.
You will want to use an appraiser that has a modern and efficient web presence. The website should have a great ordering system, and helpful and informative content. The appraisal consumer should be able to find answers to nearly all his/her questions within the content of the website. A detailed listing of the resume and background of the appraisers should be available, as should license and errors and omissions insurance documentation.
The technically efficient appraiser should have access to the MLS Information Database (be a Realtor) and also have access to multiple Public Records Databases.
The appraiser should have the ability to transmit completed appraisals to clients in either the Adobe PDF Format or the Newer AI Ready Format.
The modern digital appraiser should have highly sophisticated digital imaging capability, laser measurement devices, surveyor rolling measurement systems, and other high tech field equipment.
The digital appraiser should have off-site backup storage of all digital appraisal files.
The website of the modern digital appraiser should be well placed in the search engines. The digital appraisal company, should be easy to find in the consumers market area, on all major search engines.
The website of the modern digital appraiser should have a link to translate the website content to other languages.