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Land Refinance Can be Critical to the Survival of a Business Venture Staff - Mortgage Lenders Plus.com

Land refinance is a little different than obtaining a new mortgage on a home. Raw land is more difficult to appraise; often there have been no comparable sales in the area that can help to establish relative value. Many developers who have bought land with the intent of building either commercial or residential structures can find themselves stopped by a downturn in the real estate market. An investment in land is not exactly a passive investment, since every year the owner is paying property taxes on it.

Tax assessors may see land values very differently than a bank. Shoreline parcels along coastlines or in resort areas will be valued much more highly than inland parcels of similar size because of their potential for high-end development. They are going to be assessed, and taxed accordingly. On the other hand, local political forces may have a powerful anti-growth contingent that keeps the developer from executing his plans, or at least slows the approval and permitting process to a crawl.

In situations like that land refinance can be critical to the survival of a business venture. If the owner of the land needs money to keep the development effort going, one of the ways to improve his refinance options is to obtain partial permitting for the project. For instance, an owner can file for and seek approval for a subdivision map, cutting the land into smaller parcels. This does not necessarily constitute a permit to build on each of those lots, but a bank will look on subdivision approval as improvement on the property.

Those sorts of improvements can make land refinance an opportunity to obtain sums well above what the original cost of the property was, even if there are no comparable sales in the area to establish value. Of course, once the land refinance is completed, the bank has in effect set a new value on the property. That value may, in turn, be reflected in the next property assessment and resultant property tax.

Many owners look to commercial property specialists for land refinance assistance. There are banks that specialize solely in commercial mortgages and are more likely to understand the nuances of land refinance than a standard consumer mortgage company. Commercial mortgages are often merged with construction loans to create a package deal once the land has been permitted for development. That sort of land refinance is a welcome sight to land holders who have been paying taxes on dormant parcels for years.