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A customer is purchasing property which has an old barn in an SFHA. The appraiser says the barn is in poor condition and contributes no value to the property. In this situation, there is no hazard insurance policy to review. How do we determine the correct amount of coverage?
We have more than one property like this, and definitely need some guidance. Another loan also has a large farm with a couple of old barns in an SFHA and does NOT include them on the hazard insurance policy, and the appraisal said they had no contributory value.
You will need to determine the value. FEMA says there are two options for these buildings
functional building cost value and demolition/removal cost value. The FEMA Q&A #s 9-10 beginning on p. 35932 gives some guidance on this. https://www.fema.gov/media-library-data/20130726-1742-25045-4927/interagency_q_a.pdf.
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