Keeping it Real: A rule worthy of knowing more than 50% about

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By Natalie Gutwein

You just couldn’t take one more dreary, cold, icy-rain, wet-snow winter so you packed up your life and moved to Florida. After putting in offers on 10 properties with multiple bids and not getting a single one, you threw caution to the wind, offered 30% over the asking price plus one of your kidneys, and you were finally awarded the opportunity to purchase your dream home on this lavish tropical island called Siesta Key.
But there’s a problem. Your circa-1969 chartreuse kitchen with avocado green appliances and linoleum floor is in dire need of a Chip and Joanna makeover. Not to mention, the roof is original, the pipes have never been inspected, and basically nothing in the house has ever been updated. You call your handy-dandy licensed general contractor and for the first time in your life you hear the words “50% rule.”
What in the world is the 50% rule and why have you never heard of this? To answer that question, we need to start with a discussion on flood insurance.
After devastating hurricanes ravaged the South in 1963 and 1964, the Southeast Hurricane Disaster Relief Act was created in 1965 with a mandate to “undertake an immediate study of alternative programs which could be established to help provide financial assistance to those suffering property losses in floods and other natural disasters, including alternative methods of federal disaster insurance,” according to
This led to a study conducted by the secretary of the Department of Housing and Urban Development to determine the feasibility of a national flood insurance program.
It was determined that such a program was feasible and in 1968 the National Flood Insurance Program was created. The role of it was to provide flood insurance to communities in flood-prone areas and policy guidance to state and local governments to help mitigate future losses from flood damage. In short, the government had grown tired of rebuilding homes in areas that would repeatedly flood.
Homeowners had little to no incentive to flood-proof their homes as the federal government was required to assist “states and local governments in carrying out their responsibilities to alleviate suffering and damage resulting from major disasters,” as mandated in the Disaster Relief Act of 1950.
The early days of the flood insurance program were rough. Each community across the country had to be mapped and their flood risk assessed. You can imagine how difficult this task was without the technology we have today.
Participation in the flood insurance program was low for many years despite early subsidies. Eventually, regulations were put in place that forced enrollment. In order to receive federal assistance, property owners in communities that had been identified as flood prone were required to purchase flood insurance. Also, any loans using federally regulated funds in a declared flood-prone area were required to purchase flood insurance. Increased participation increased the available monies to fund the program.
So, why do you care about any of this? If you live on Siesta Key, the entire island (as well as all barrier islands) is in a flood zone. As a general rule, the FEMA 50% rule applies to homes in flood zones where the lowest floor is below base flood elevation, or below the 100-year flood elevation. Basically, if you have a home that is below base flood elevation, you can only make improvements to the home that are equal to or less than 50% of the appraised value of the improvements on the land. This does NOT include the value of the land — only the structures improved upon it.
To find these values, you’ll need to look on the Sarasota County Property Appraiser’s website at Pull up the property in question, cross reference the numbers under the current year and the column labeled building, and that’s the amount you have to work with. For example, if the value of the structure is $500,000, you have a budget of $250,000 to spend on your renovation.
This isn’t a hard-and-fast number; there are ways to raise the market value of the improvements and therefore get more money to work with on your renovation. According to, here’s what can be used to get what you want:
The owner can obtain an independent appraisal by a licensed appraiser, property values for tax purposes, detailed estimates of the structure’s actual cash value, the value from NFIP claims data, or the judgment of local building department staff.
There are also possible exemptions. Improvements to correct code violations do not have to be included in the total project cost and buildings labeled as historic may be exempt. Also, items such as survey costs, permit fees, landscaping, fences, swimming pools, plans and specifications are not included in your budget.
There are so many details involved in purchasing and owning homes in flood zones and, in Florida in general, that just don’t exist in other areas. My recommendation, if you’re buying a home in a flood zone, you need a real estate professional that knows what the 50% rule is all about. He or she doesn’t have to know every detail or how to administer it, but should at least have a working knowledge of what it is and how it affects your ability to make the homes you are considering purchasing your dream home.
That agent should be able to direct you to architects and licensed general contractors who can advise you from there. The last thing you want is to purchase a home that you can’t make your own!
Just ask, “Do you know what the 50% rule is?” You’ll know immediately if you’re with the right agent.
You stay sunny, Siesta.

(Natalie Gutwein is a licensed Realtor with Sotheby’s International Realty’s Judie Berger Team on Siesta Key and is also a member of the board of directors of the Siesta Key Association civic group.)

Natalie Gutwein
Author: Natalie Gutwein

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