Here is how I explained the situation to one of my clients the last time it came up. Feel free to plagiarize at will.
Hi Christina, the situation comes up often. I am appraising the whole site, not just the improvements. The lender's flood certification exempts them from obtaining flood insurance on the property, however, the rear portion of the subject site IS LOCATED in a FEMA Flood Hazard Area and the appraisal has to reflect such. I actually asked the borrower how many times that creek had flooded since he lived there & he said “four times, quite a ways onto his property”, however, it never got close enough to the house to worry him. See the below flood map which is current and correct. Everybody needs to ask themselves what would happen if somebody built something valuable at the back of that site and it washed away? And there was an audit trail showing that the flood hazard area was pointed out in the appraisal and then later changed for some reason? I agree that it would be easier for the lender if I just changed the appraisal, however, this is one instance where the underwriter has to do a little extra documentation work, and not simply ask the appraiser to revise the report for the sake of expediency. Most flood certifications that I have seen point out the fact that although a portion of the subject site lies within the flood hazard area, the "dwelling and related improvements" are clear of the flood zone , however, this one does not some reason and said determinations should probably be sourced from a different vendor in the future to avoid this type of confusion.
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