Posted on: 06th Jan, 2010 11:37 pm
I want to know if the bank can refuse someone from selling a subdivided lot. My ex asked the bank if he could split his property and they said yes, He paid almost $15,000 to do it and has a buyer. My ex wants to take the proceeds ($140K!) and pay down his mortgage then sell his part with the house. The lender won't let him sell the property now. Can they legally do that? Thanks for any help!
The lender has given the mortgage on the whole of the land and not a part of it. Thus, for the lender, the whole land will be a collateral. If your ex sells off a portion of it, then the collateral will change. That's the reason why the lender is not allowing him to sell off the property now.
did you get the lender's approval in writing for the change to the collateral? if not, then yes, they have every right to refuse to allow the sale because they've still got a legal encumbrance on both legal lots.
if they've issued written approval and signed off on the subdivision of the two lots, then you should be able to sell the unencumbered lot. this would have been accomplished with help from the county recorders office. in my area the plat/subdivision of the property would have to have lender approval before it could get recorded.
that said, if you've already somehow got the two legal pieces recorded, then i recommend going to the lender again and ask for approval to modify the collateral. if you've got sufficient equity and you're not impairing their claim on the property, it shouldn't be a problem.
actually, reading closer, if ye going to use the proceeds from the parcel modification to directly pay down the loan, they may work with you to record the sale in conjunction with the modification of collateral. you need to explain to them the final goal and the timing and see what they can do to work with you to accomplish things simultaneously. the other option is to refinance, but just make sure thave got two separate legal properties working with. the refinance will be on the new parcel and will clear the title on the old parcel.
example. you buy a 2 acre parcel, have a house built on half of it and leave the other half with clear road access and capability to house another building. the mortgage has a deed of trust on the entire legal parcel. letay the 2 acres cost $50,000, and the house cost $200,000 to build and is now valued at $250,000 at the time of the original mortgage. if you want to subdivide that property and remove half the acreage from the collateral, then e reducing the value from $250,000 to $225,000. if you owe anywhere close to the $225,000 - $250,000 range, then they aren going to want to let that land be removed because it reduces the loan to value of the transaction into an area that they probably dot want to see. (90-100%!).
if they've issued written approval and signed off on the subdivision of the two lots, then you should be able to sell the unencumbered lot. this would have been accomplished with help from the county recorders office. in my area the plat/subdivision of the property would have to have lender approval before it could get recorded.
that said, if you've already somehow got the two legal pieces recorded, then i recommend going to the lender again and ask for approval to modify the collateral. if you've got sufficient equity and you're not impairing their claim on the property, it shouldn't be a problem.
actually, reading closer, if ye going to use the proceeds from the parcel modification to directly pay down the loan, they may work with you to record the sale in conjunction with the modification of collateral. you need to explain to them the final goal and the timing and see what they can do to work with you to accomplish things simultaneously. the other option is to refinance, but just make sure thave got two separate legal properties working with. the refinance will be on the new parcel and will clear the title on the old parcel.
example. you buy a 2 acre parcel, have a house built on half of it and leave the other half with clear road access and capability to house another building. the mortgage has a deed of trust on the entire legal parcel. letay the 2 acres cost $50,000, and the house cost $200,000 to build and is now valued at $250,000 at the time of the original mortgage. if you want to subdivide that property and remove half the acreage from the collateral, then e reducing the value from $250,000 to $225,000. if you owe anywhere close to the $225,000 - $250,000 range, then they aren going to want to let that land be removed because it reduces the loan to value of the transaction into an area that they probably dot want to see. (90-100%!).