Subdividing Real Estate with a Mortgage

Posted by admin on August 9, 2013

If you’ve purchased and mortgaged acres of land for sale and wish to split the property up, the subdivision of said real estate can be a time-consuming, costly procedure. However, it is possible to accomplish if proper steps are taken.

The key is to request and receive a partial release from the current mortgage holder. Your lender will either have a deed of trust or mortgage recorded for the real estate in question with very specific language regarding the transfer of rights in property. Essentially, it will state that all  the land and its improvements are mortgaged by the lender and that you cannot sub-divide and sell any part of the lender’s security without permission.

For example, you have two acres and your home sits on one; you want to sub-divide and put up the second acre of land for sale. But the lender mortgaged two acres plus a house, so you’re decreasing his value in his collateral for the mortgage. You would first need to contact the lender and attain a copy of their process for obtaining a partial release. Then, you’d need to contact your zoning/land use county government office and get their subdivision requirements and approval.

If no issues arise, a land surveyor stakes the property and devises a new legal description for the excess acre of land for sale. This can be time-consuming and expensive (up to $8,000 depending on your area), but the information is essential as it must be presented to the zoning department for approval.

The lender will then request an appraisal for the acre with the home, and one for just the single acre. If the survey and legal description are approved and the appraisals are acceptable for your mortgage, your lender will issue a partial deed of release.

It’s a tedious and expensive process, but one that is worth it in the end. If you have any concerns about real estate matters, trust AllAcres. In addition to assembling an expansive and user-friendly land investment directory, AllAcres also connects buyers with real estate professionals to answer questions about properties and acres of land for sale. Plus, our comprehensive land investment directory can help you find every conceivable type of commercial land for sale, farming land for sale, ranch land, vacant land, and more. And if you’re selling property, our land investment directory exposes it to the highest possible number of buyers. To find out how AllAcres can help, contact us online.