Property and Flood Valuation

The purpose of the Property Insurance Replacement Cost Valuation is to determine the correct amount of insurance the association needs to comply with their association documents and fiduciary responsibilities. The property insurance replacement cost valuation is not a real estate appraisal. A real estate appraisal and a property insurance valuation have two different objectives. Most real estate appraisals are used to determine the marketability of a property for selling and buying purposes. All Property Insurance Valuations are used to determine the cost of reconstructing the insurable property according to the type of coverage included in the insurance policy. Most policy provisions are set by the State of Florida Statutes.

All Flood Insurance Valuations are used to determine the cost of reconstructing a property according to the type of flood insurance policy coverage. The flood policies are usually issued by FEMA. There are different types of policies for different types of property as listed under the National Flood Insurance Program. The most common flood insurance program for condominium associations is the Residential Condominium Building Association Policy (RCBAP).

The RCBAP for flood insurance covers more property than the typical Florida property insurance policy for condominium associations. This is important to identify the covered property under RCBAP and meet all insurable aspects of the policy, plus carry the correct amount of flood insurance coverage.

What is the Difference Between a Property Valuation Report and Flood Valuation Report

Typically, for most residential buildings, the replacement cost will include everything within a building up to the point of the drywall within each of the individual residential units. What is not included in a property reconstruction cost is the individual unit owner’s wall paint, wallpaper, flooring, cabinets, light fixtures, plumbing fixtures, major unit owner upgrades such as built-in bars, and unit owner personal property.  The foundation/subsurface work is also excluded for valuation purposes. All air conditioning units are typically included for valuation purposes.  In common areas owned by the association buildings, such as lobbies, fitness rooms, restrooms, etc., all interior items such as tiles, paint, cabinets, light fixtures, and plumbing fixtures are included.  All personal property owned by the association is typically excluded for valuation purposes.

In a flood valuation report, the foundation/subsurface is included for valuation purposes since this item is usually affected by the uprise in flooding situations.  Also included for flood valuation purposes are individual unit owner’s wall paint, wallpaper, flooring, cabinets, light fixtures, and plumbing fixtures.  Once again, all individual unit owners and association owned personal property is excluded for valuation purposes. The State of Florida does not have set guidelines for flood valuation reports, so most valuators and insurance carriers use FEMA as a basis for the minimum standards of what is required within this report.  In flood valuation reports, all unit owner interiors that are included are usually builder grade.  Unit owners should obtain additional coverage for upgrades that exists in their unit…, such as tiles to marble, etc.

The Process

The process starts with an onsite inspection of the property to be valued. Typically, we meet with the property manager or responsible party to review the property owned by the association and determine the intended use of the valuation. We list all property to be included and collect field data on each of the insurable property locations. A detailed sketch of the major building locations is completed along with the information on all other insurable property. Photographs are taken of the insurable property.

We complete quantity calculations on the data collected for each piece of insurable property and develop the estimated insurable replacement cost for each insurable asset. We use the segregated cost method to establish replacement cost. All insurable assets are listed in a summary format with their respective estimated replacement cost. This information is coupled with a narrative description of the property, photographs, plus construction and insurance underwriting information which is needed to properly understand the overall property insurable risk and to produce the Property/Flood Insurance Replacement Cost Valuation Report.

The State of Florida requires all Insurance Valuation Reports for Condominiums and Coops to be updated at a minimum of 3 years.