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#2270060 - 05/04/22 08:08 PM Low Value Buildings
compliance101 Offline
New Poster
Joined: Aug 2016
Posts: 3
We are looking for guidance to determine the insurable value on a extremely deteriorated residential building (still has 2 walls and roof) . The appraiser will not provide a cost approach and labels it as a tear down due to its current condition. The borrower states they will tear it down and the appraiser provides a demolition cost but it seems from Q&A #9 demolition cost can only be used for farming, ranching or industrial purposes. The insurance agent has not been helpful and just wants to use the sale price. Any guidance for determining a value would be appreciated!

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Flood Compliance
#2271110 - 06/01/22 11:22 PM Re: Low Value Buildings compliance101
J Van Horn Offline
Junior Member
Joined: Sep 2012
Posts: 25
Coppell, Texas
Q&A 9 was never finalized as previously written, and is now Section X "Amount 2" in the 2022 reissue of the Interagency Guidance, which does not prohibit applying demolition cost (or any cost to that matter) to non-farming, ranching or industrial purpose structures.

If the building would not be replaced if damaged and the appraiser and bank agrees it has no value relative to collateral, then determining a demo value and insuring to that amount (if it simply can't be demo'ed today) seems a very reasonable, sensible, and easy to document solution.

My opinion - take it or leave it!

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