How to treat excess land in a subdivision?

[Zoe]

The residence straddles the two or it is on one lot and the other lot is free of any improvements (including outbuildings, septic drain fields, power poles, etc.?


There should be no real obstacle to selling separately as long as it is truly separate from the improved lot. You would only have to rewrite the deed descriptions.

True but what if second lot H&B use is higher than improved lot and assemblage? MV definition is very unique on H&B use. Sometimes bank will say forget the adjoining lot. Just do MV on subject and 1st lot. We already have a mortgage on the 2nd lot. That is just gravy. 2nd lot is just more security for us (client).

If they are two separate lots, they would have different legal descriptions. The mortgage can include both legal descriptions.

And seller (borrower) can sell that lot if they wish and ask for release on the mortgage from the client.

If there is any improvements to 2nd lot that helps improved lot # 1 lot, assemblage could be H&B use.

 

[Terrel L. Shields]

By this, do you mean the second parcel can be sold or developed as separate lot?

Why not? What would prevent it? Just because multiple lots are on one deed does not mean subdivision is impossible. The deed does not dictate the use. Developers and builders take title to numerous lots at a time when buying land to build on. They then execute separate deeds for each house.

 

[Mark K]

If, as you say, it is already a separate unique parcel with its own parcel number, the only reason it cannot be sold Separately would be if the dwelling or other improvements are located on the second lot or they straddle the line.

If the house, garage, etc. are on one parcel, and the other parcel is vacant, there’s no reason it cannot be sold separately, assuming the highest and best use in that area tells you that there is a market for a separate lot.

Confer with the client to see how they want it handled. They may not be aware of the situation. From an appraisal standpoint, it can be handled in more than one way or they may not want it included in the report at all.

 

[JTip]

 

[Zoe]

View attachment 108937

True if MV is value definition. That is why I said if MV is the value definition, you have to do Highest and best use with two different legal descriptions. The lender said that is fine. Just do the subject and lot it sits on.

Your really looking at 2 different appraisals if you don't. Lender said just do subject and lot it sits on.

If the borrower sells the vacant lot, they can always go back to lender and ask for release of mortgage of the 2nd lot. Lawyers will take care of that.

Being a subdivision, it probably had to be approved by the local authority.

 

[George Hatch]

As Terrel already noted the orientation of the structural improvements could come into play. If they are located 100% within the minimum setbacks of one of the parcels then selling off the other won't normally be a problem. Assuming adequate vehicular and utility access as well as meeting the width/depth minimums and street frontage requirements (if any).

As an example, if the structure is within 3ft of a lot line but the minimum side setback is 5ft or 10ft then that might become an obstacle to splitting the two into separate ownership. Or not. All RE is local.