Commercial Loans and Fun Blog

Large Land Loans Are Almost Impossible Today

Posted by George Blackburne on Wed, Oct 1, 2008

Don't Waste Your Time Trying to Place Land Loans Today

If you're a commercial mortgage broker and some real estate developer comes to you and asks you to find a commercial bank or a hard money lender to replace his existing mortgage loan on his land, you should probably decline the engagement. You're probably never going to get paid.

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Most of the land development deals that blew up when the subprime crisis erupted were on residential land. On the order of 2 million homes are in foreclosure, and the United States is already awash in unsold homes. The United States needs new homes like we need a hole in the head.

A great many banks and hard money lenders - once a major source of loans on residential subdivisions - have already foreclosed on a ton of land. Many more land loans are in the process of foreclosure. Banks and hard money lenders are terrified of new land loans. The chances of selling some bank or hard money lender on making another land loan are almost nil.

There are only two types of land loans that have a chance in this market. Land zoned for commercial use might have a chance, but only at a very low loan-to-value ratio, say 35% to 40%.

The other type of land loan that might make sense is a loan to a very well-healed developer who is buying foreclosed land for pennies on the dollar and is putting down a huge down payment, say 45% to 50% in cash.

Guys, you need to feed your family. You're not going to do that if you waste precious hours trying to replace some $7 million land loan on some stalled housing project or residential land development deal.

Use your time instead to call on local banks for the small ($100,000 to $3 million) commercial permanent loans that they turn down.  These are the deals that close and feed your family.

All this being said, there will still be a few land loans made made on residential subdivisions this year. Your best chance of closing one of these land loans will be by applying to the 100+ land lenders on C-Loans. You might as well. C-Loans is free.

Click here to apply for a land loan.

If you're a commercial loan broker, please be sure to print out Blackburne & Brown's commercial hard money loan pricing matrix.

Topics: Large Land, Loans