Flood Compliance Question

We have property that is in a flood zone. It has land and a couple of buildings on it. We did a loan against this property for $180,000. The replacement value is $260,000.00 and that is what the customer has it insured for. The appraisal came in as $180,000.00. The appraisal did not break out the value of the land and the buildings. The customer stated that the land was worth $100,000.00. Since the appraisal did not break out what the actual buildings were worth, the loan officer put forced placed insurance for $80,000 on the buildings which was the difference. Is this okay and in compliance with the rules? Can we take the word of out customer on the value of his buildings? Or should it be for the $180,000 since that's what the appraisal states it is all worth. Thanks

Your statements are confusing. The appraisal stated the total property is worth $180,000 and that is what you loaned them? Where are you getting the replacement cost of $260,000?

i'm sorry, that's what he has his property insured for. And yes, that is what we loaned him.

Then you need to know the value of the improvements to know how much force placed insurance that you need. Subtracting the land value from appraised value is going to get you in trouble.

Thanks Randy.

Hey Randy,

I saw your comment about removing the land value from Appraised Value. We have a property we are doing a loan where the land is valued at 2x the Dwelling. Trying to calculate required flood insurance.

$1,500,000 Appraised Value
$1,080,000 Land Value
$545,289 Replacement Cost
$735,000 Loan amount
$1,563,834 cost approach to value

Is this a primary dwelling?

Yes

Then it would be the replacement costs of the dwelling - you need a dwelling policy for $250,000 unless there are multiple buildings involved that cannot be excluded as detached structures.

Got a Dwelling for $578,000 and Flood for $250,000

Thanks

Not sure where you got $578,000 as you said "$545,289 Replacement Cost" from the appraisal. But that is neither here nor there as all you need is $250,000 either way.

He already had $578,000 Dwelling coverage with insurance company.