“We have a beautiful home with 5 acres, and there is a second smaller structure on the property. We have been trying to sell since 2008 with no bites until recently, when a buyer appeared. We lost the sale, however, because the bank refused to finance two structures on one parcel… Any suggestions?”
Yes, split your parcel into two parcels, each with a structure, and sell them separately.
Two structures on one parcel is a big problem for the owner trying to sell it because potential buyers will have difficulties getting financed. If the second structure is a habitable unit, the question arises of whether the buyer will rent it out. Under the rules, such a buyer is an investor rather than a permanent occupant. Investors are subject to more strict underwriting rules than permanent occupants, and pay more for their mortgage.
If the second structure is some kind of an appendage to the main house, such as a barn or recreation facility, a potential purchaser will face a different problem. An appraisal of the property will be based on the assumption that the second structure has no value, which means that the loan amount will be smaller and the required down payment will be larger.
Home appraisals are based primarily on “comparables”. These are recent sale prices of homes that are similar to the property being valued. But a parcel with two structures will not have any comparables, forcing the appraiser to ignore the second structure. The appraisal will therefore undervalue the property as a whole.
The problem posed by two structures on one parcel will seldom arise in connection with very expensive homes, because the margin of error in appraisals is very large even without the complication posed by multiple structures, and eligible buyers will not need much if any financing. But the lower the price range within which the property falls, the more are potential buyers dependent on financing a major portion of the price, and the greater is the penalty posed by multiple structures.
7 ways to make money in real estate without giving up your full time job ADMINISTRATORS DEED AFFIDAVIT OF SURVIVORSHIP affidavit of title ASSIGNMENT AGREEMENT ASSUMPTION AGREEMENT BUYERS CLOSING DOCUMENTS COMMON LAW MARRIAGE contract for deed COVID AND EVICITION DEATH AND REAL ESTATE Deed d prefix stamp d stamp Easement in Gross EFFECTS OF INFLATION ON REAL ESTATE elements of real estate contracts everything you need to know about real estate contracts EVICITION RULES financial instituion future of commercial real estate GENERAL WARRANTY DEED INFLATION LANDLORD LIS PENDENS medallion signature guarantee medallion signature guarantee stamps Missouri Easement Law Owner financing PROBATE real estate contracts seller financing SELLERS SPECIAL WARRANTY DEED STATUTE OF FRAUDS SURVIVORSHIP AFFIDAVIT TENANT TENANTS IN COMMON title affidavit TRANSFER ON DEATH DEED WARRANTY DEED WHAT IS A FINAL WALKTHOUGH? what is an affidavit of title? wrap around mortgage
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