Adivice - Dividing Your Property

Mortgage and Lending with First Horizon Home Loans

I noticed differen't Q&A's about this topic. I thought I would write out my thoughts on the issue and share some of my experience. I hope you find it to be educational.  

First things first. Answer these three questions:

1) Do I own this land free and clear?

2) If not -> Then how much has my home increased in value?

3) Will this new section of property hold true value?

            Lets start with question one and why it is important. If you own the land free and clear then you have the right to do with this property as you wish assuming your county or jurisdiction will agree to your plans. If this is the case then you will need to contact your county or jurisdiction and speak with a surveyor. There job will be to provide a new description of the property based on your request. This will either be represented by a Mylar (which looks like a 'blue print' of the land) or in some cases these have been replaced by forms (that look like math homework gone wrong)

            If this is not the case, then you will have another battle to win, and this battle can take up to 6 months to complete. If an investor owns a mortgage on your property (let us say "Mortgage Company" for example) then you will need permission from that investor before the county will sign off on these new adjustments. Title is also involved in this process so I would suggest contacting a well experienced Title company to assist you in the process.  In order for an investor to sign off on the Mylar or forms a procedure must take place to insure the investors interests are still protected after the divide. You must contact your mortgage company in order to begin this process. Once you have requested the information you will receive instructions regarding who will be in charge of the appraisal service. Below is a common scenario provided by the investor.

"This Appraisal Company" will schedule an appointment with you and send us a complete appraisal which will include the fallowing results:

•·          Current appraised value of the whole property

•·          Appraised value of portion of the property being released

•·          Appraised value for the remaining property after release

The fallowing are common instructions provided by the investor

  • A written request including the signatures of all borrowers
  • Processing fee of $xxx.xx dollars (non-refundable)
  • Amount of total cash considered to be received, if any; and how much to be applied to the principle balance.
  • Legal description of the land being released.
  • Legal description of the remaining property.
  • Your current home telephone number and day time phone number where you can be reached.
  • Your loan number must be included in the documentation you send.
  • An appraisal will be ordered on your behalf to "This appraisal Company" as required

The following is a common response from the investor regarding your request.

            We recently received information from you pertaining to a Partial Release. Even though all request items were not included, the information was submitted to the Investor for review. We have been notified that a decision cannot absolutely be reached with out the above mentioned data. Therefore, please return the items mentioned as soon as possible. Upon receipt of all required documentation listed on page one of this letter, "Mortgage Company Name" will contact you in a timely matter at the phone number(s) you provided to discuss the cost of this appraisal and to schedule a time for the appraiser to meet you. "Mortgage Company" will submit your request to your Private Mortgage Insurance Company (PMI) and/or Investor for approval. We will notify you in writing regarding approval immediately when a decision is made, and if any conditions exist, you will be notified at that time. A reduction loan balance may be required depending on how the value of the property is affected by the partial release. Please allow up to 120 says for this process to be completed.

            This brings us now to our second question. If you when you original purchased the property (or refinanced) your current Loan To Value (how much you owe versus how much the home /property is worth) was 80% - Then your interest rate and product that the investors hold is based on 80% - In order to divide the property you may be required to pay down the balance of the existing loan in cash before the divide can be excepted. Sometimes in a declining market they may request further balance reduction or say no to the plans all together.

            This brings us to our final question. Does this new lot hold true value? Contact a Real Estate Agent, a Contractor, and an Attorney regarding this matter. Try to use common sense and not dollar signs. Examples: Is the new property to small and close to the road? Is it possible to build on this new land? Does this new property represent costly difficulties for a contractor (buyer)? Does this new land represent the trend or basic needs of your area? Are there legal problems regarding the position of the property?

            Overview: You will first need the documentation that shows your intention (Mylar, etc) - This is done by a surveyor or otherwise - You will then need to submit this idea to the investors. If all goes perfect they sign off on your plans and county follows smoothly. If not then you will need to follow the instructions or provide the funds for the balance reduction as requested by the Investor. With new laws and difficult changes to this industry the old methods of simply refinancing the property have become a mute point. You end up in a ketch 22 situation. The lender won't sign off in order for Title to create the new description and Title won't sign off unless county can provide a new description - County won't sign off on the new description without permission from the Investor - And the Investor won't sign off on the new description without a signature from a county official. Okay...Makes perfect sense right?

            I hope you found this helpful.

•-         David

Cell: 206-437-1004

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