Jeff Foxworthy popularized the "If XYZ... you might be a redneck," joke formula.
In appraising, I often come across property conditions that make me say to myself, "You're probably not closing..." Everyone knows that old homes with chipping and peeling paint aren't closing on a FHA/USDA/VA loan until the paint is cured, but there are so many more reasons that your closing could be in jeopardy.
In a recent case, a contract included the sale of multiple parcels. This is an immediate yellow flag for conventional, FHA, USDA or VA financing. Multiple parcel sales have extra hurdles that they need to clear, and here are some of them:
The Fannie Mae Selling Guide B2-3-04 requires the following:
Each parcel must be conveyed in its entirety. Parcels must be adjoined to the other, unless they comply with the following exception.
Parcels that otherwise would be adjoined, but are divided by a road, are acceptable if the parcel without a residence is a non-buildable lot (for example, waterfront properties where the parcel without the residence provides access to the water). Evidence that the lot is non-buildable must be included in the loan file.
Each parcel must have the same basic zoning (for example, residential, or agricultural).
The entire property may contain only one dwelling unit. Limited additional non-residential improvements, such as a garage, are acceptable. For example, the adjoining parcel may not have an additional dwelling unit. An improvement that has been built across lot lines is acceptable. For example, a home built across both parcels where the lot line runs under the home is acceptable.
The mortgage must be a valid first lien that covers each parcel.
In summary, if your property has multiple parcels, they need to be connected OR merely divided by an access road. In cases where the parcels are divided, the additional lot must be non-buildable. The lots must have the same basic zoning. If the parcels fail these tests... you're probably not closing, until you make changes to the contract.
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