We have a commercial property where the lesser of the 3 amounts will be the replacement cost. Do we use ACV (which is replacement cost minus depreciation) or can we take the total appraised value and subtract land value and use that amount for flood? The appraisal show a "depreciated replacement cost" but it includes landscaping, driveways, etc. Would we subtract these extra items out to arrive at RCV for flood? The total appraised value will include landscaping, cost multipliers and entrepreneurial incentives, so we'd need to subtract those out along with land value. Would that be considered a "reasonable approach" as per the following?

A lender may choose from a variety of approaches or methods to establish the insurable value. They may use:

(a) An appraisal based on a cost-value (not market-value) approach;
(b) A construction-cost calculation;
(c) The insurable value used in a hazard insurance policy (recognizing that the insurable value for flood insurance purposes may differ and that adjustments may be necessary; for example, most hazard policies do not cover foundations); or
(d) Any other reasonable approach, so long as it can be supported. Q&A 9.

Do we use ACV (which is replacement cost minus depreciation) - Yes

or can we take the total appraised value and subtract land value and use that amount for flood? - No - taking market value minus land is not ACV


The appraisal show a "depreciated replacement cost" but it includes landscaping, driveways, etc. Would we subtract these extra items out to arrive at RCV for flood? - If you have that amount of detail - that is exactly what you would do.

The total appraised value will include landscaping, cost multipliers and entrepreneurial incentives, so we'd need to subtract those out along with land value. - Again, total appraised value is market value and has nothing to do with ACV.

Thank you for your help with this!