Insurable Value

[sputnam]

My points to the lender about not doing insurable value were: 1) basic E&O insurance doesn't cover it, 2) CoreLogic is typically not used by insurance agents, but rather 365, 3) the point made earlier that insurable value typically covers demolition cost which most appraisers don't know how to calculate, 4) most insurance companies provide it free of charge whereas this one lender in my case expects it to be included in the appraisal, 5) I believe it's a USPAP violation to include data within an appraisal report that has nothing to do with the development of the market value. I told my lender client the words "Insurable Value" have no business in an appraisal report.

It's not a USPAP violation however, you do have to include the types and definitions of the values you are reporting and the sources of the definitions.

 

[ITVSME]

CoreLogic bought Marshall & Swift and Marshall & Swift/Boeckh many years ago, CoreLogic is rebranding to Cotality.
"RCT" is their software for residential insurable replacement cost estimate, "Commercial Valuation" is for commercial and Ag (fka BVS - The old Boeckh software).
These are "reconstruction" cost basis.
Competing and acceptable options are e2Value or 360-Value.

If you're using the MVS or other hard copy books, you're likely using cost data that isn't for insurance purposes.
These are "new construction" cost basis, which will typically generate a lower estimate.

Your professional liability insurance likely excludes coverage for insurable value estimates.
Don't assume - ask.

The lenders have been allowed by Fannie to accept the inappropriate cost basis "cost approach" estimates to satisfy their documentation for minimum acceptable insurance requirements.
This is for acceptance to be able to sell the loan into the secondary market: it would not be adequate to protect the borrower in the event of a total loss.

Insurance agents, brokers, and underwriters all have access to the appropriate tools for insurable value estimates.
Loan servicing companies have the same software as well; they use it for auditing insurance limits on in-force loans.
So, why do lenders ask/demand the appraiser for an insurable replacement cost estimate?
a. They like the lower number because it makes the loan easier to close.
b. It's less work for them and it's good enough to sell the loan into the secondary market.
c. They don't know why, it's a check box on a form.

You can't stop the lenders or others from misusing your cost approach for insurance purposes, but disclaimers are recommended.
Could you agree, for an extra fee, to collect the data points they need to generate an insurable value estimate? Sure, just ask them what they need.

I've given this sermon enough times on this forum. Have fun.

 

[Artemis Fowl]

I used to have a disclaimer on my cost approach. Something like: This cost estimate is specific to the definition of market value and cannot be relied upon for determination of insurable value.

 

[BRCJR]

A lender should only REQUIRE you to have enough insurance to cover the loan balance.

If the lender tells you to carry x and that ends up not being enough to replace the dwelling, with a like type product, who gets sued?

A smart/good insurance provider knows how to figure this.

 

[ZZGAMAZZ]

CoreLogic bought Marshall & Swift and Marshall & Swift/Boeckh many years ago, CoreLogic is rebranding to Cotality.
"RCT" is their software for residential insurable replacement cost estimate, "Commercial Valuation" is for commercial and Ag (fka BVS - The old Boeckh software).
These are "reconstruction" cost basis.
Competing and acceptable options are e2Value or 360-Value.

If you're using the MVS or other hard copy books, you're likely using cost data that isn't for insurance purposes.
These are "new construction" cost basis, which will typically generate a lower estimate.

Your professional liability insurance likely excludes coverage for insurable value estimates.
Don't assume - ask.

The lenders have been allowed by Fannie to accept the inappropriate cost basis "cost approach" estimates to satisfy their documentation for minimum acceptable insurance requirements.
This is for acceptance to be able to sell the loan into the secondary market: it would not be adequate to protect the borrower in the event of a total loss.

Insurance agents, brokers, and underwriters all have access to the appropriate tools for insurable value estimates.
Loan servicing companies have the same software as well; they use it for auditing insurance limits on in-force loans.
So, why do lenders ask/demand the appraiser for an insurable replacement cost estimate?
a. They like the lower number because it makes the loan easier to close.
b. It's less work for them and it's good enough to sell the loan into the secondary market.
c. They don't know why, it's a check box on a form.

You can't stop the lenders or others from misusing your cost approach for insurance purposes, but disclaimers are recommended.
Could you agree, for an extra fee, to collect the data points they need to generate an insurable value estimate? Sure, just ask them what they need.

I've given this sermon enough times on this forum. Have fun.

As it happens so often, the AF is right on time, as I received a detailed ROV last night that is based upon factors included in the subject's recent renovation of which I was unaware, and the borrower's corresponding reference to the Insurable Value. The original report included a disclaimer in the Intended Use statement that insurable value is a different type of aminal, and a statement in the Final Reconciliation that describes reults of the SCA as the primary basis of the OV, although responding to the ROV is a good mental exercise, which also enhanced Public Trust because the SCA Condition factor is affected to the extent that my original OV is being revised upwards by $xxxx.xx--although I've never previously changed an OV in response to a ROV and don't know whether the V should be changed throughout the report including the Letter of Transmittal page, or just expressed in the section of the Addendum devoted to my response to the ROV--and wondering whether JG will advise me to refrain from revising an OV to avoid a potential sanction because doing so implies an admission of wrong-doing.

 

[Terrel L. Shields]

The old Boeckh software).

Was excellent software and you could toggle between RC and Reconstruction Cost (insurance) in their residential software. The ag book was a fraction the cost of M & S. Boeckh was bought out because they were too big a competitor to M & S.