Bank is preparing to close a loan to construct condominiums on a lake. The actual construction will not begin until later next year but there is currently a residential structure on the land (which is near a lake). The structure is not occupied and will be torn down. The apprasier determined that the building has $0 value as it is "not consistent with the intended purposes" of the land; therefore the bank believes flood insurance will not be required. In reading the flood guidelines my understanding is that if the bank takes the structure as collateral they would need flood insurance otherwise they would have to exclude it from the mortgage so that they are securing land only. They asked if I would get another opinion so I would like to ask if anyone else has differing thoughts on this where the appraisal basically values the structure as $0? Thank you..

Since there will be construction of condos on the property anyway, why not order the flood - price is not normally very high. Wouldn't the bank and/or developer want to know if the property is in a flood hazard area?

If there is a structure in a special flood hazard area - flood insurance is required. Whether or not the appraiser used it in their valuation is immaterial.

You are 100% correct, unless the structure is torn down before the loan closes.

Thank you all for your quick responses and support.

Also, if the loan is to "construct" the condo's - you also need evidence of the flood policy for the condo's prior to closing - whether or not the construction is going to start for a year.