Loan request to purchase lot and new construction of building. Property currently has two structures on it, both of which are being raised for customer to start new construction. One of the two structures is in a flood zone; new planned construction is not in a flood zone. So initial flood determination obtained on property says portion of the property is located in a flood zone. Are we still required to obtain flood insurance on this structure (even though it will eventually be raised)? I know with construction loans, you are allowed under the rules to obtain flood insurance at origination OR alternatively, you can obtain once the foundation has been poured or an elevation certificate is obtained, as along as you have internal controls in place to monitor.

Unless the building is gone at the time of loan closing, flood insurance is going to be required.

And then once we have proof the building is gone, flood insurance on this structure can be cancelled? We obtained an appraisal, but it was done for the lot and new improvements, and does not provide a value for the existing structure and loan amount is big. What is our best bet for determining a value for this structure, to determine how much flood insurance we need?

When faced with a similar scenario in the past, i've advised the lender to engage someone who can give a demolition value for the structure to be razed.