Posted By: Robert Storring November 18, 2003
I just read Jim Hazzard's guest column (REM, November 2003) and couldn't agree more with what he says.
Having sold rural properties for 30 years I run into this same problem time and again. Lenders of all descriptions will only allow an appraisal for the home and a few minor acres rather than the whole package. If the price is determined by the whole package then it stands to reason that the house and a few acres will not appraise as high.
BUT since the whole package is one unit and usually would require an expensive severance to divide, the lender then encumbers the whole unit with the mortgage. This would lead me to ask what liability the lender might face if in fact it had to take back the property and sell and sold for the value of the house and few acres. I had one case with the TD bank where we had 400 acres with waterfront, they would only consider the house and 1 acre, not on the water,at a value of 160,000 where the extra land with the waterfront actually added another $150,000 to the value. I'm sure if they repo'ed and sold for 160,000 the owner would be in a position to sue the bank.
I think that CREA should take this up as an issue with CMHC and the lending institutions.
Thanks to Jim for bringing this issue forward.
Robert Storring
President Kingston & Area Real Estate Assoc.
Past President OREA(1997)
