This is a term that is only used when it's possible that the land or lot upon which a structure sits has a significant amount of value when compared to the overall value of the home. An appraiser will determine market value of a home but will also break down the value of the lot, separate from the structure, as well as what it would cost to reconstruct the home as if it were brand new. This is also sometimes called an "improved" lot, meaning a piece of raw land which has a house or structure built on it. But problems can occur if the lot represents a certain percentage of the overall value.
For example, say a home is for sale for $500,000 and the lot is two acres. After the appraisal is completed it is noted that the value of the lot itself is worth $300,000. What does a lender do? The lender must determine if they're making a lot loan or a standard mortgage. Yes, the lot is taken into consideration such as size and topography but if the lot is worth more than the home, how much is the home worth?
Lenders can make loans for lots, or raw land, but typically ask for 20 to 30 percent or more down in order to complete financing. If the land is worth more than the structure then a lender will have to determine how much of a down payment will be needed in order to complete the transaction and ask, "Are we making a loan on a house or on a lot?"
If the lender can't clearly make that determination then it might be a situation where a mortgage might คอนโด originally require a minimum 5 percent down would require 30 percent down due to value of the lot. Many times when this happens the structure itself is older, smaller and run down when compared to improved properties in the area and the best financing might be to simply tear down the structure and build from scratch.
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