Today, I want to discuss flood zones and the importance of knowing whether or not a property is in a flood zone before buying it. Many people do not understand why this is important, but it is – very important.
Both commercial buildings and houses are insured by FEMA (Federal Emergency Management
Agency) and there are limits to the coverage available and regulations around what can be added to or renovated.
The National Federal Insurance Program (NFIP) General Property Form offers commercial policyholders coverage for:
1. Building Property up to $500,000
2. Personal Property up to $500,000*
Currently, in Regular Program communities, the maximum limit for all one- to four-family residential buildings is $250,000, and contents coverage is limited to $100,000. **
It is important to know if the property you are building is in a flood zone for the eventuality that someday you may want to build an addition or completely renovate that house.
In addition to the detriment of limited insurance coverage, if you buy a house in a flood zone, you can only add to it or renovate it up to the value of half of the actual building or you must bring the house’s ground floor to one foot above the community’s base building elevation. For example, let’s say you buy a $750,000 property and the county says the building is worth $400,000 and the land is worth $350,000, then you would have a $200,000 budget for the renovation.
Recently, I was called to see a prospective client in Pinecrest for a whole house renovation. Unfortunately, the property was worth about $800,000, but the county had the value of the house as $15,000 because it was old and fully depreciated. What was of value to the county was the land at $785,000. So in that case, the budget for the project would have been $7,500. What can you do with $7,500 in Miami? Not much!
He would have had to raise the floor several feet in order to end up one foot above the community’s base building elevation. This is a physical impossibility since the ceiling and roof could not be raised for a reasonable amount of money. What happened? The project was dead. The only way to get around this would be to get a private appraiser to do a different type of appraisal, a cost approach, and that the appraiser could come up with a higher valuation for the existing house.
So before you get into a nightmare situation like this, find out if the house is in a flood zone and whether the house’s ground floor is 1’-0” above the community’s base building elevation. FEMA has maps for this online and you can put in the address and find out. Go here and input address: https://msc.fema.gov/portal/search
If you have questions, or would like for me to help you determine your chance for success in buying a property that you will be able to add to or remodel, call me on my cell at 305-439-7898.
Maria Luisa Castellanos, R.A., LEED AP
United Architects, Inc.