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Defining Raw Land & Land Development-SLTV Loans

Answered by: 
Randy Carey

Question: 
We need some guidance in defining raw land and land development specifically as it relates to SLTV ratios. I've seen no terminology from regulatory agencies defining what raw land is. From legal terminology, raw land is land in its natural state that has been untouched by man. It has not been cleared nor does it have access to necessary infrastructure for vertical development. Specifically to my issue I have a house sandwiched between two vacant tracts. The subject has been appraised as a primary site (house) and the two vacant tracts as excess land. The excess land is approx. 10 acres, has access to electric, phone, and potable water utilities (no sewer) and has been cleared (flat land, minimal to no trees). The site has frontage road access. The borrower has no current intent to build on the excess land. Would the excess land be considered raw land or developed land?
Answer: 

I think you are confusing the Loan Category with the current status of the collateral.

Land development loan means an extension of credit for the purpose of improving unimproved real property prior to the erection of structures. The improvement of unimproved real property may include the laying or placement of sewers, water pipes, utility cables, streets, and other infrastructure necessary for future development.

You are not making a loan for land development. At this point of time, you are making a loan on unimproved real property (bare land) with no plans for development or construction.

First published on 06/17/2018

Filed under: 
Lending
Filed under lending as: 
Real Estate Lending

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