Buying bare land

Anyone have any advice here for dealing with banks, etc?

I just found out that some land adjoining mine is for sale. I can either refi my home and join that parcel to mine, or buy it seperate from mine. It's absolutely perfect for what I need, and if I don't buy it, the owner's going to split it into less-than-an-acre lots and plant mobile homes on -- probably 5 or 6 bedroom Mobile Home McMansions. You know the type -- three fireplaces, two living rooms, five bedrooms, five bathrooms, cost more than a stick built home, and the owner chokes on the payments, trashes the inside, and gets refi'd in six months and then I have abandoned houses next door driving my property values down. And blocking my nice view of the mountains.

They're willing to sell it to me because they wouldn't have to put in an access road or a well, and it'd be an easy sale with no advertising.

So, uh, I want to buy it. Both because I want to have room to expand my hatchery someday, and because I really don't wnat McMansion Mobiles behind me -- ruin the view, and I can't guarantee they'll like my birds. (My current neighbors like the birds. They get free eggs and in the words of one neighbor, a 'free country soundtrack to go with them' ... And I have marans and ameracaunas.)

I can afford the payments and I've got about $2,000 down, and the worth of the land is about $15K. So do I refi my home and combine that parcel with mine, or do I buy it as bare land? I have perfect credit, for what it's worth and will have no problems qualifying.

Leva

[Terri]

Mortgage rates are low right now. Why don't you crunch the numbers each way? Get the info from the bank, try it out, and see which is cheaper.

[Mike in Ohio]

Personally I would tend towards buying the bare land. If it is large enough you can get it under agricultural use valuation. IF and when you eventually decide to sell it will probably be worth more as 2 parcels. If you are going to merge the two together you will probably have to pay for both parcels to be surveyed.

The downside is that you will have two tax bills. Depending on where you are located I would check with Farm Credit Services. We have always found them easy to deal with.

Our farm currently consists of 3 parcels. Can't think of a reason to spend the money to merge them.

Mike

[boxwoods]

Go to your bank that you have a mortgage with and talk to them about the different ways of financing it. If you have good credit with them, they should just give you a 2d mortgage, rather than go through the expense of a refinance.

[katydidagain]

If you refinance your house, what you do with the money is your business; if you have enough equity to pay cash for the land it's in your mortgage. (Most banks won't lend on raw land or charge very high rates to do so.) Buying the lot won't make it part of your "parcel" unless you petition the county to make it one entity. Don't. The county did get tired of billing me for 4 lots on my 1/3 acre and added the part lot to another but didn't raise the assessed value--yet! Undeveloped land is taxed at a lower rate in my area. When you're ready to leave, sell it to the McMansion guys and have the last laugh.

katy

[Bob in WI]

If you choose to not refinance, which is what I would do, try asking the owner if he would hold the mortgage. Make him an offer at the same rate you would get from the bank. At least talk to the owner and see if there are any other options.


In these times of low interest rates most never think of owner financing, but it may be your answer. Either way good luck on your purchase.

Just a thought. A land contract may save the owner taxes if the payments are spread out over a period of years instead of all at once. Check it out.

[SteveD(TX)]

I would simply call your local banker or mortgage company and check with them. Most banks do indeed lend on raw land, but expect to pay about 1 or 2 percentage points higher on the loan than a typical home mortgage. If it's part of your home package, you should get a better rate. And it's not necessary to "petition" the county to have the additional land included with "your parcel" in all areas. Depending on your local appraisal or taxing authority, it might be as simple as a phone call, if for taxing purposes. It may require getting a new survey showing both parcels together, then filing that with the county. And it could actually lower your taxes. For instance, if land is valued at $2,000 for 10 acre tracts and $1800 an acre for 20 acre tracts, combining them will save you money on your taxes. As a rule, larger tracts sell for less per acre than smaller ones.

[mary,tx]

You should check with your local mortgage lenders. Around here, I know you must put 20% down when buying raw land. Since you have excellent credit, I'm sure someone will work with you on the best way you could get the land.

[Blu3duk]

If you are friendly with your bankster, then by all means chat them up and see what they reccomend. around here they might loan the dollars and you would keep the titles separate, yet be tied together on the mortagage, the county would still send a separate tax bill, and that would not be any higher than the two properties acvtually joined onto one bill..... besides what else do government workers have to do besides stuff envelopes???????

personally i would buy it if you can strike anykind of a deal, just to keep out rifraf [like me] but how much land are you talking for $15k? around here that would be only a couple acres..... not enough to build many homes on.

William

[agmantoo]

A home equity loan will be your cheapest approach and you will not have to kiss butt. Buying bare land will usually get you 80% loan and you will have to make up the difference. Hold your $2k as an emergency fund and go with a home equity for the loan. Forgot to mention.....you should have a tax advantage with the home equity loan also!

[Bob in WI]

you should have a tax advantage with the home equity loan also!

Only if you can itemize on your taxes.

[Maura]

Before deciding whether or not to combine the parcels, speak to your local assessor. When property is assessed, the land is valued seperately from the buildings. If you combine, there will still be only one house, one well, one septic, plus any outbuildings you have. Depending on how property sells in your area, you could have a lower value on the combined property than on two seperate parcels. I have always told taxpayers that if they want the tax break for a larger parcel (rather than two small ones) they would have to combine the property (unless it wasn't physically feasible). I won't keep a sellable property artificially low because that screws the rest of the township when the property sells at the real market value.

The caveat is, if you ever want to split the parcel again, make sure that you can do so. Zoning laws change all the time and a buildable parcel could change from, say, 2 acres to 5 acres. Townships often do this to keep McMansions to a minimum.