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#2281911 - 03/07/23 02:59 PM Uninhabitable dwelling located in SFHA
Spartan Fan Offline
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Joined: Mar 2010
Posts: 35
We have taken vacant farmland as collateral on a loan. The appraisal came back and there is a dilapidated dwelling on the property. No value was given to this structure in the appraisal. We normally wouldn't run a flood determination on vacant land, however since the appraisal identified a structure, the processor ran a flood.
I believe this structure meets the definition of a building; therefore, we need to require flood insurance. How do we determine appropriate coverage amount in this case? Also, in the future, is it appropriate to run a flood determination on a vacant farmland loan, if the appraisal identifies a structure?
Last edited by Spartan Fan; 03/07/23 03:04 PM.
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Flood Compliance
#2281912 - 03/07/23 03:05 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
rlcarey Offline
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Posts: 83,219
Galveston, TX
Well, if there is a structure on the property how can it be vacant farmland?

You will have to determine the insurable value. And do not let anyone tell you that it is $0. Either that or have the owner knock it down.
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#2281927 - 03/07/23 05:59 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
RebekahL CRCM Offline
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RebekahL CRCM
Joined: Feb 2003
Posts: 874
Big Sky Country
FWIW, I had an examiner once tell me to get a demolition quote and use that as the value. There is no formal provision for such a valuation, but we did it. This same examiner also required we value and insure an outhouse. Flood compliance is weird.

Randy's suggestion is the best... have them hook up the tractor to a corner stud and pull it down, or torch it.
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#2281928 - 03/07/23 06:08 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
BoomCat Offline
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Joined: Jan 2016
Posts: 17
Indiana
We've done the same thing with respect to a building that has "no value" - we've had them get demolition costs and used that. I agree with Randy as well, just get the structure torn down.

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#2284191 - 05/05/23 04:29 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
Piano63 Offline
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Joined: Feb 2022
Posts: 6
We have something similar - the dwelling is in very bad condition. Looking at the photos, the roof is really bad. The insurance company has stated they will not be able to insure the dwelling because of the roof and it being vacant. In reviewing the NFIP flood insurance manual it states Building Eligibility - General Information - Has two or more outside rigid walls with a fully secured roof. Will this exempt our structure from flood insurance or should we still obtain demolition cost coverage?

Thanks!

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#2284192 - 05/05/23 05:18 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
Dan Persfull Offline
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Dan Persfull
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Bloomington, IN
Looking at the photos, the roof is really bad.

There is a difference in not having a roof and having a damaged roold. Sounds like your structure has a damaged roof.

and it being vacant.

A building being vacant is not a determining factor for flood insurance eligibility that I am aware of..
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#2284207 - 05/05/23 08:54 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
Andy_Z Offline
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I also use a perspective of a claim. Say there was a flood, the building washed away. the FEMA rep says "we can pay an emergency claim today, will $20K cover the loss" to which the borrower may reply, "Yes" or "No, how about $30K." Alternatively the same flood sweeps the building away. Neighbors are getting checks. Your borrower says, "my bank said I didn't need flood insurance, what's the name of a good lawyer."
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#2284208 - 05/05/23 09:00 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 83,219
Galveston, TX
The insurance company has stated they will not be able to insure the dwelling because of the roof and it being vacant.

Have them show you that either of those issues make the build uninsurable for a NFIP policy. While their underwriters may not underwrite other hazard insurance on the building, the NFIP is not predicated on either of those factors.
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#2284241 - 05/08/23 03:46 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
John Burnett Offline
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John Burnett
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Cape Cod
If the building is knocked down before loan closing, ....
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#2284406 - 05/10/23 08:12 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
Piano63 Offline
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Joined: Feb 2022
Posts: 6
Thank you all for your expertise!

I totally agree with you all and had initially indicated that we need flood insurance on the home.

Then they came back with the photos and insurance letter. I just have never had to deal with or have seen a home with a quarter of the roof pretty much gone/open and wanted your expertise on this loan file.

Thanks again!! Love reading all your forum posts!!

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#2285206 - 06/02/23 03:06 PM Re: Uninhabitable dwelling located if SFHA Spartan Fan
Rocky P Offline
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Joined: Jun 2003
Posts: 7,650
Florida
Probably 15 years ago, the question came up about a building that if you leaned against it, it would come crashing down. At that time, Dan indicated there were 3 options:

1 - get insurance and make the loan
2 - don't get insurance and don't make the loan
3 - lean against the building!
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