Property cannot be rebuilt - If damaged by fire

[Ariba]

This has everything to do with HBU analysis and disclosure to the client and nothing at all to do with insurance.

What has HBU to do with this. Maybe it is a issue after it has burned down. However, the current use is legal, grandfathered single residential. Please explain?

 

[Rudy Canoza]

It's HBU would legally be an SFR. It is grandfathered. It can not be rebuilt.

It has everything to do with HBU and disclosure to the client and nothing to do with insurance. Seems pretty clear to me...

 

[Howard Klahr]

Ron,

While this is not directly on point, you may find this study prepared by the Florida Deprtment of Insurance Regulation interesting and gain a better understanding of the issues regarding insurance coverage(s) and the costs to rebuild.

Law and Ordinance Coverage Study

 

[Ariba]

It's HBU would legally be an SFR. It is grandfathered. It can not be rebuilt.

It has everything to do with HBU and disclosure to the client and nothing to do with insurance. Seems pretty clear to me...

Rudy,

Like I ask in the prior post since it is so clear to you, please share your knowledge with us less knowledgeable. Just because it cannot be rebuilt as a single residential property in the future how does that involve HBU today? HBU might be an issue after it has been destroyed.

Setting the HBU and insurance coverage aside. The original question was, does the fact that you cannot rebuild the property as a residential property affect the final opinion of value in todays market?

 

[Rudy Canoza]

Rudy,

Like I ask in the prior post since it is so clear to you, please share your knowledge with us less knowledgeable. Just because it cannot be rebuilt as a single residential property in the future how does that involve HBU today? HBU might be an issue after it has been destroyed.

Setting the HBU and insurance coverage aside. The original question was, does the fact that you cannot rebuild the property as a residential property affect the final opinion of value in todays market?

I haven't seen the property so I'm keeping it simple.

Subject is SFR. Zoning is other. Subject is grandfathered. That makes it legal. Assume abutments are SFR and not other. HBU is SFR.

Okay...now the city says it can't be rebuilt as SFR.

So are you appraising based upon the hypothetical that it will be destroyed? Or as-is?

What on Earth does insurance have to do with this analysis? is the second point. We are appraisers, not adjusters. Analyze and report...

 

[Ariba]

So are you appraising based upon the hypothetical that it will be destroyed? Or as-is?

What on Earth does insurance have to do with this analysis? is the second point. We are appraisers, not adjusters. Analyze and report...

You keep focussing on insurance! Give it a rest. If you read my posts I never said insurance had anything to do with opinion of value.

What about hypothetical on a Fannie Mae appraisal?

 

[Lee Lansford]

A post from another thread;



Assuming that the lender requires property insurance for a minimum of the loan amount what exposure does the lender have in a situation like this? Why would the lender be concerned if the property cannot be rebuilt. The lender as no exposure since the loan amount is covered by property insurance.

Why would this have any impact on opinion of value for this property?

Ron, your final question: How does the appraiser measure the market's reaction to the Subject's zoning status? All things equal, would the typical buyer purchase a 2-unit property that conforms with zoning or one (such as the Subject) where the improvements could not be re-built as they presently exist?

This is a complex assignment and requires the appraiser to do research to determine, first, whether there are other properties with the same zoning status and, second, if there are, research and determine how the market has previously reacted (via prior sales) to this status.

--Lee

 

[Ariba]

All things equal, would the typical buyer purchase a 2-unit property that conforms with zoning or one (such as the Subject) where the improvements could not be re-built as they presently exist?

Yes. IMHO, a typical buyer could care less. How many buyers really think that their house will burn down. That only happens to other homeowners. What is the percentage on a national basis of houses burning down. I venture to say less than 1%.

 

[Carnivore]

If the structure could not be replaced after a fire and the site were unsuitable for an "equal" use - then wouldn't it be effectively a "taking" by the governing body?

Oregon Doug

O Doug,

I think your premise has already been argued in a court of law. Apparently there have been several outcomes and I am still not sure of where it will all go. I assume for example that your talking about changeing zoning from, lets say a 0.10 acre lot that has a house on it with residential zoning to a Industrial zoning that requires a minimum of lets say 5 acre site. That zoning change would effectively make the site unsuable for anything with exception to possible variances. Thus, the action effectively is a regulatory taking imo.

Even if it was not a regulatory taking, the owner could still suffer a financial loss, which translates into a lesser market value.

http://www.volokh.com/posts/1120149179.shtml

 

[Joyce Potts]

A post from another thread;



Assuming that the lender requires property insurance for a minimum of the loan amount what exposure does the lender have in a situation like this? Why would the lender be concerned if the property cannot be rebuilt. The lender as no exposure since the loan amount is covered by property insurance.

Why would this have any impact on opinion of value for this property?

In a perfect world you'd be right and in this world, you're also right, which is why many lenders will go ahead and lend on a property that has rebuild issues.

There is never a scenario where someone doesn't have some level of exposure. What if the loan was a 70/30, with no PMI and no restriction that the lender collect PITI and forgot to pay the insurance premium? What if the improvements were destroyed by the homeowners and insurance had an exception clause. Of course, that could happen with any property so, for the most part, I agree with you.