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#658653 - 12/28/06 08:46 PM Flood - Appraised Value is $0
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
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..

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#658660 - 12/28/06 08:50 PM Re: Flood - Appraised Value is $0 Jan94
sue's mom Offline
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sue's mom
Joined: Feb 2003
Posts: 455
IL
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?

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#658677 - 12/28/06 08:59 PM Re: Flood - Appraised Value is $0 sue's mom
Skittles Offline
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Skittles
Joined: Sep 2002
Posts: 13,963
TN
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.
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#658681 - 12/28/06 09:00 PM Re: Flood - Appraised Value is $0 sue's mom
Dan Persfull Offline
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Dan Persfull
Joined: Aug 2002
Posts: 46,953
Bloomington, IN
Quote:
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.


You are 100% correct, unless the structure is torn down before the loan closes.
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#658771 - 12/28/06 10:40 PM Re: Flood - Appraised Value is $0 Dan Persfull
Jan94 Offline
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Joined: Mar 2001
Posts: 828
USA
Thank you all for your quick responses and support.

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#659556 - 01/01/07 03:23 PM Re: Flood - Appraised Value is $0 Jan94
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 79,898
Galveston, TX
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.
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