Determining Market Value of a Structure The method to assess market value of all structures within a community is determined by the local floodplain regulations prior to a disaster. Market value refers to the price an asset would bring on the open market. The source to determine market value may defined in statute or code by state or local governments pertaining to zoning, property taxation, or real estate transactions. It is important to note two basic NFIP requirements: • Market value must always be based on the condition of the structure before the improvement is undertaken or before the damage occurs. • Only the market value of the structure is pertinent. The value of the land and site improvements (landscaping, driveway, detached accessory structures, etc.) and the value of the use and occupancy (business income) are not included. Many communities estimate “market value” using either a formula based on a structure’s assessed value developed for property tax assessment purposes and adjusted to approximate market value or estimates of a structure’s market value, including depreciation. Communities may also allow a private licensed appraisal to provide a structure’s market value. The SD Process: Roles & Responsibilities Substantial Damage/Substantial Improvement is one tool available to state and local officials focused on managing development within the floodplain. The process is a collaboration between FEMA, municipalities, contract service providers, and property owners. • FEMA and NFIP Oversight – FEMA provides the guidelines, tools, and training for SDE. FEMA’s SDE tool, accessible to both professionals and trained laypersons, is the central technology for data collection and analysis. • Counties and Local Governments – Municipalities and counties, typically for unincorporated areas, are responsible for ensuring compliance with floodplain management regulations. They oversee SDE determinations and manage the permitting and appeal processes for affected properties. • Contract Service Providers – Organizations like engineering and disaster consulting firms provide staffing and logistical support to help municipalities and counties execute the SD process by supporting assessments, data workflow management, and quality assurance checks. Work performed by such service providers is reviewed by local governments prior to the issuance determinations of Substantial Damage. • Property Owners – Property owners are central to the SDE process. They receive detailed reports about their property’s substantial damage status and play an active role by providing additional damage evidence, requesting reassessments, or appealing findings. If the cost to repair is 50% or more of the structure’s pre-damage market value, the structure is considered “Substantially Damaged” and must be brought into compliance with current local floodplain management and building codes.
Who Makes the Substantial Damage Determination? Local jurisdictions are responsible for substantial damage determinations based on their specific floodplain ordinances and will notify property owners of those decisions. FEMA does not make substantial damage determinations or notify property owners; however, FEMA may assist local jurisdictions with damage data to help them make these determinations.
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