Montana Acreage Limitation with VA loan

[srinaldo86]

My family is attempting to place an offer on a home which has 72 acres and is considered common for the area.

Problem is that we are using a VA loan which Montana law says can not exceed 40 acres.
The VA has no restriction for this property.

Our 'loop hole' is having only 40 acres appraised (which is all that is required by Montana state law) and so long as the appraisal meets the asking/offer price our lender will follow through with the loan.

The question here is - Will a home appraiser contracting for the VA limit their appraisal to 40 acres or are they absolutely required to include the entire property.

(The land is all hill side and not ideal for any kind of hobby farm or additional construction. If we could buy this house on 40 acres or less we would do it.)

 

[CANative]

Do the zoning laws specific to your property have a minimum lot size? If so, what is the minimum?

 

[Terrel L. Shields]

Do the zoning laws specific to your property have a minimum lot size? If so, what is the minimum

Doing someone else's job, Can?

I guess I don't understand why Montana has any say-so in a VA loan. Or do you mean the state limits a residential appraiser to 40 acres or less therefore, the appraiser has to be a commercial appraiser?

 

[srinaldo86]

CANative - Not that I am aware of, I can't find anything of the sort in the documentation that I have.

Terrel -
Montana state law will not authorize a VA backed loan on a property over 40 acres because they are unable to foreclose on properties over 40 acres.
However - Montana state law also says that an auditor is only required to appraise 40 acres.
Our lender is saying that IF the appraiser only appraises 40 acres (which legally is within their right), we can move forward with the purchase.

I spoke with a VA representative who requested to speak with our lender and appraiser to try and straighten things out, because as I'm sure you know the VA has no limitation on acreage size, but Montana apparently does. He didn't seem to pleased that Montana is undermining federal law.

My question is how difficult would it be to request that the appraiser only conduct the appraisal on the 40 acres.

 

[srinaldo86]

Also - Thank you both very much for your insight on the matter. My wife and I are near desperation to get this home, and we are doing everything we can.

(P.S. Moderator - thanks for moving me to the right forum, sorry I missed that.)

 

[CANative]

I think you're not getting a lot of response because of the multiple issues.

Here's what I thing FWIW: If what you're saying is accurate (that Montana law prohibits foreclosure on properties over 40 acres) then appraising it using the hypothetical that there is onluy 40 acres for purposes of comparison wouldn't work because that only represents a value under a condition that doesn't exist in reality. All of the 92 acre would be encumbered by the loan so all of the 92 acres would be subject to foreclosure in the event of a default. And that would be contrary to Montana law. So you're back to square one.

Does that make sense?

 

[Mike Kennedy]

Consult an Attorney - re properties with more than 40 acres that are not regulated by the Small Tract Financing Act which is only for properties that do not exceed 40 acres. .


http://www.alllaw.com/articles/nolo/foreclosure/laws-in-montana.html

 

[srinaldo86]

The problem is the state of Montana has a homestead law that prohibits investors from foreclosing on any parcel over 40 acres. As a result, if the property is over 40 acres, the investors are requiring some investment from the borrower...in your case, to proceed with a VA loan, they would require 20% down. Again, this is only due to Montana law prohibiting the foreclosure process.

Montana law also states that if there if the acreage exceeds 40 acres, the appraiser can assess only 40 acres. And if the assessment is done on only 40 acres, we can do the loan VA. If you decide to proceed, we will request the appraiser, per Montana law, to assess only 40 acres. If he does, and the value supports the sales price, you can proceed with a VA loan. If he will not only assess 40 of the 72 acres then I will not be able to proceed with a VA loan. So, the risk is we would need to switch the loan to a conventional loan - with a min of 5% down or cancel the loan and you'd be responsible for the appraisal cost.

I talked to XXXXXXX about the possibility of the property appraising for the sales price is 32 acres are excluded...he said since it was on a hill and the land was "unusable" that he didn’t think it would contribute much value. So, I think we should be ok here...

This is directly from my lender (I took out all identifiable material to protect the author and parties involved.)

We have been pre-approved for the property, and everything (according to our lender) will hinge on the appraisal.

EDIT: 20% Down is not an option for us at this time.

 

[srinaldo86]

Consult an Attorney - re properties with more than 40 acres that are not regulated by the Small Tract Financing Act which is only for properties that do not exceed 40 acres. .


http://www.alllaw.com/articles/nolo/foreclosure/laws-in-montana.html

Most home mortgages in Montana are trust indentures (also known as deeds of trust) under the state’s Small Tract Financing Act (STFA), which is for properties that do not exceed 40 acres. This type of mortgage can be foreclosed nonjudicially (without a lawsuit) or judicially (with a lawsuit).

Is this what you're getting at? I think the problem is if I try to get a loan outside of the STFA I will end up needing 5-20% down and will not be able to use my veteran benefits (poor rates, more fees, etc.)

 

[Terrel L. Shields]

I think the answer is check with an attorney. If VA cannot work it out...well, I'd say this isn't the place for you and if the owners are not willing to divide it and sell <40 acres you might consider Farm Credit - https://www.northwestfcs.com/Products-and-Services/Country-Home-Lot-Loans

Frankly, if you cannot afford 5% down on this size property, hopefully it is terribly cheap or you might rethink how you intend to pay for it.