BUYOUT QUESTIONS

Answered by Roxanne Gray

State Hazard Mitigation Officer, Wisconsin Emergency Management

QUESTION    Relocation Funding. . . Was this issue ever resolved regarding relocation funds and are these funds going to be offered as part of the buyout offers or separately? Is the amount $15,000 or $25,000, or based on individual properties?

ANSWER      Yes, relocation benefits will be part of the project.  The amount eligible is based on individual properties.  Relocation assistance is only available for primary residences, and they are eligible up to $25,000.  Relocation assistance is to find comparable housing.  If they purchase a comparable house that is less than the fair market value of their property, then they are not entitled to relocation assistance for comparable housing.  However, if it costs them more than they may be entitled up to $25,000.  The example I use is if you have a 3-bedroom, 1-bathroom, 1500 sq/ft home and the FMV is $100,000 and it costs you $115,000 to purchase a comparable 3-bedroom, 1-bathroom, 1500 sq/ft home then you are entitled to $15,000 in relocation assistance.  They are also entitled to some moving costs which is based on the number of rooms, etc.  Tenants (for the rental properties) are also entitled to relocation assistance under both the State Relocation Law and the Federal Uniform Relocation Act, whichever is more (they are pretty much the same.)  The acquisition guidance includes information on what they are eligible for.  Basically, if their rent was $700/month and it costs them $800/month for comparable housing, they are entitled to the difference up to 42 months (federal) and 48 months (Sate - I think.)  In other words they could be entitled to $4,800.  There are maximums.

QUESTION    What is FEMA’s definition of a “Fair Market Value”?

ANSWER      Fair market value is based on an independent appraisal by a Wisconsin licensed and certified appraiser.

QUESTION    Are the Fair Market Values based on the previous six to twelve months of pre-flood conditions?

ANSWER      We picked a date of June 1, 2008.

QUESTION    Is the 2007 Tax Assessed Value of the homes the actual Fair Market Value being offered as per the listings or is there actually going to be appraisals done for each home per the FEMA Buyout Application?  As some of the homes’, if not all of the homes’, tax assessed values were raised for the 2008 property taxes and it appears that all of the dollar figures were based on 2007 assessed values versus actual appraisals.  But appraisals are budgeted into the cost analysis.

ANSWER       Answered in 2 and 3 above.

QUESTION    Do the FEMA initial funds for repairs/replacement (up to $28,800) need to be deducted from the buyout offers if the funds were used to repair or to purchase another home through SBA (Small Business Association)?

ANSWER      Rental assistance is not a duplication of benefits (DOB) and will not be deducted from the offer for primary residences.  However, any funds received for home repair or replacement are treated as a DOB.  If they can prove (receipts, etc.) that they used the funds (or any portion of) making repairs than that portion will not be deducted.  For those that received the maximum grant for housing repair/replacement, if they used any of those funds for temporary housing and have receipts, we will not deduct that portion as DOB.  (See attached FEMA letter.)

QUESTION    Will the appraiser go into each home to guess prior conditions or will their appraisals be based on square footage, age, and style? And if the appraiser enters each home, will they enter at their own risk, releasing current property owners of all liabilities?

ANSWER      If safe, the appraisers will go into the homes and inspect them and estimate the value on prior conditions.  I really can't answer the second sentence in this question.  If the structures are that unsafe, they probably will not go into the structures and will have to use assessment records, etc.  They can probably get a good idea by looking in the windows, talking with the property owner, etc. 

QUESTION    When will the offers begin and what number of homes will be in the groupings? (3 to 5, etc.)

ANSWER      Offers will begin once the Town completes the appraisals and they have been approved by the State Review Appraiser.  At that time the State will issue to the Town a letter authorizing them to make the offer based on the approved appraisal.  I hope that by the end of summer offers and closings will begin.  I have suggested that the appraiser do the first 5 and submit to the State for review so if there are any problems they can be identified and corrected early in the process.  After that the appraiser and town can do as many as they want at a time.  This will really depend on how fast the appraiser can complete the appraisals. 

QUESTION    Is FEMA’s 75% ($4,033,218) their final number, or will it be adjusted accordingly as the actual appraisals come in?

ANSWER      This is sort of a final amount.  The State receives an allocation for the Hazard Mitigation Grant Program for all projects.  Once those funds are obligated, there are no additional funds available.  However, if as projects are being completed and a community incurs a cost underrun on their project, those funds can be reobligated to another project where there is a cost overrun.  So there is a possibility that the town could receive additional funds, but we wouldn't know that until probably 2 years or so. 

QUESTION    Is the current list of properties (list #3 from FEMA) the final list, or will the placing change again?

ANSWER       The properties have to be purchased in order starting with the properties with the highest benefit-cost ratio as they are carrying those properties that have a benefit-cost ratio (BCR) less than 1.  There are 6 properties that have a BCR of less than 1.  The rest are all above 1.  If any of those with a BCR of greater than 1 withdraws from the program, we will need to recalculate the BCR to make sure the overall BCR for the entire project is still above 1.

QUESTION    What happens to the homes that are on the list that are being used as rental property versus primary residence since the flood that have not been kept up to date for the previous year’s property taxes? And the actual rental properties that are on the list and not to be considered for a FEMA buyout?

ANSWER      I'm not sure I understand this question.  In order to be eligible for federal relocation assistance renters have to have lived at the property at least 90 days preceding initiation of negotiations (first formal indication that the community wanted to purchase the particular property).  Any tenant who occupied the dwelling prior to a disaster event is usually eligible except in the case where negotiations begin so long after the event that the event is no longer a relevant factor. If the dwelling has been reinhabited after the event, former tenants are generally not eligible for relocation assistance.  Every property is looked at on a case-by-case basis.  If tenants received rental assistance, that may also be treated a DOB for them.  For tenants we have to address both the state and federal relocation laws to see what they are eligible for.  Any back taxes have to be paid by the seller at closing.  Property taxes for the current year will be prorated (just like in a regular real estate transaction.)