MULTIPLE STRUCTURES ON ONE PARCEL A PROBLEM FOR HOME SELLERS

“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.

ADMINISTRATORS DEED ADMINISTRATORS DEED IN MISSOURI AFFIDAVIT OF SURVIVORSHIP affidavit of title ASSIGNMENT AGREEMENT ASSUMPTION AGREEMENT Benefits of owner financing BUYERS CLOSING DOCUMENTS COMMON LAW MARRIAGE contract for deed COVID AND EVICITION DEATH AND REAL ESTATE Deed DOCUMENTS TO EXPECT AT CLOSING EFFECTS OF INFLATION ON REAL ESTATE EVICITION RULES EXECUTORS DEED EXECUTORS DEED IN MISSOURI FINAL WALKTHOUGH future of commercial real estate GENERAL WARRANTY DEED HOW TO REMOVE A LIS PENDENS NOTICE INFLATION LANDLORD LIS PENDENS ORAL AGREEMENT FOR SALE OF REAL ESTATE IN MISSOURI ORAL AGREEMENTS IN MISSOURI Owner financing PRECLOSING WALKTHROUGH PROBATE REAL ESTATE AND ORAL AGREEMENTS REAL ESTATE CLOSING DOCUMENTS RENTAL CRISIS seller financing SELLERS SPECIAL WARRANTY DEED STATUTE OF FRAUDS SURVIVORSHIP AFFIDAVIT TENANT TENANTS IN COMMON TRANSFER ON DEATH DEED WARRANTY DEED WHAT IS A FINAL WALKTHOUGH? wrap around mortgage

November 2021
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