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#976737 - 06/17/08 08:07 PM Flood-Low-Value Building
dgp Offline
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Joined: May 2005
Posts: 145
Sorry for this lenghty question. I have just discovered a loan in excess of $250m that is secured by a large amount of acreage and an old house that is in a flood zone. The purpose is to purchase the acreage for hunting privledges. The acreage is more than enough to secure the loan. The appraiser has made this statement regarding the old house, there is an old frame house on the property but is not considered to have any material contributing value and it requires significant remodeling. We have contacted the appraisor and ask him to give us a value on the structure & his reply was it needs so much work he wouldn't venture a guess. Can we use no material contributing value as meaning no value and not require any flood insurance?

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#976740 - 06/17/08 08:12 PM Re: Flood-Low-Value Building dgp
Ray_ Offline
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Joined: Aug 2006
Posts: 879
Dallas, TX
No, if the house is located in the flood zone, it must be covered with insurance.

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#976741 - 06/17/08 08:12 PM Re: Flood-Low-Value Building dgp
rlcarey Offline
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rlcarey
Joined: Jul 2001
Posts: 77,216
Galveston, TX
See: page 29 of MPFIG - Low-Value Building on High-Value Land

You are going to need a flood insurance policy.
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#976760 - 06/17/08 08:34 PM Re: Flood-Low-Value Building rlcarey
dgp Offline
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Joined: May 2005
Posts: 145
If the appraisor will not give us a value to the building then how much insurance do you require, the maximum allowed of $250m?

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#976772 - 06/17/08 08:45 PM Re: Flood-Low-Value Building dgp
Ray_ Offline
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Joined: Aug 2006
Posts: 879
Dallas, TX
Pg. 27 says it must be the lowest of (1) the outstanding principal balance of the loan; (2) the maximum amount of coverage available; or (3) the full insurable value. Without having the third variable you can only go with what you have. The appraiser should be more cooperative since the bank is a source of business.

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#976790 - 06/17/08 08:58 PM Re: Flood-Low-Value Building Ray_
dgp Offline
100 Club
Joined: May 2005
Posts: 145
Thats bascially what I told my loan officer, we shouldn't have paid for the appraisal until we received the info that we needed.

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#976797 - 06/17/08 09:00 PM Re: Flood-Low-Value Building dgp
David Dickinson Offline
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David Dickinson
Joined: Nov 2000
Posts: 18,762
Central City, NE
You'll need to establish a value for the building.
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David Dickinson
http://www.bankerscompliance.com

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