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Old 10-31-2005, 09:51 AM
Matthew Jehs Matthew Jehs is offline
Join Date: May 2003
State: Florida
Professional Status: Certified General Appraiser
Posts: 30

I have been receiving requests from lenders for insurable values in my reports. Typically, I have done them in summary reports, but wanted to find the official stance of the Appraisal Institute on how to calculate it, as I am now working on a self-contained. The 12th addition doesn't really address it. Does anyone have or know where I can find an industry standard position on insurable value, specifically, does it include profit or not, does it include site improvements, and what are the requirements to be deducted as part of the construction process that wouldn’t apply (excavation, foundation, underground piping, utilities etc.) Thank you, any help would be appreciated.
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Old 10-31-2005, 10:53 AM
PL1957 PL1957 is online now
Join Date: Jul 2004
State: Illinois
Professional Status: Certified General Appraiser
Posts: 2,590

Insurable value depends greatly on the definitions and specifics of the policy in question. Generally, relying on the insurable value sections of MVS and spelling out exactly what was included/excluded is adequate for almost all users.
Old 11-03-2005, 06:03 PM
Paula Greer Paula Greer is offline
Join Date: Mar 2005
Location: Newport Beach, CA

Posts: 46

I am now on the lender side (as a commercial review appraiser). At both of the banks where I have worked as a reviewer, we have debated the issue of whether profit should be included in the insurable value. My boss at the previous employer insisted that it should be included as no developer is going to undertake a project without profit. My argument was that we are looking for an insurable replacement value assuming some sort of destruction, and that no insurance company is going to pay for profit, only the actual cost to replace. At my previous place of employment, we even called the gurus at the Appraisal Institute and were told that there is no standard, it's everyone for themselves on this one. Marshall & Swift does has a service that you can sign up for that will provide the M&S version of insurable replacement cost. I think the M&S fee was based on$15 per estimate or you could sign up for an unlimited number of estimates for a monthly fee.

I do have a very good excel table that Wells Fargo Bank wants all appraisers to use in determining the insurable replacement value. It does not include any line item for profit. The construction figures are based on M&S figures for cost per SF and other improvements. I used this same worksheet for other lenders when I was working as a fee appraiser, as well as for my current employer when I have to come up with an insurable value that the appraiser did not provide. So far I have had no complaints. For whatever that is worth.
Old 11-03-2005, 08:38 PM
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alex gilbert alex gilbert is offline
Join Date: Feb 2003
Location: Oakland, Calif
State: California
Professional Status: Certified Residential Appraiser
Posts: 549

Here's one insurable value work sheet I've seen.
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