Can you buy a house and the seller keep a portion of the land?

Question

Greetings Everyone

I'm in the process of buying a investment property that sits on a lot that the owner wants to sell and retain a portion of the land to sale separately. He has already submitted the lot subdivision application and survey to the city of Atlanta for approval.  I spoke with the city and they confirmed that the application was indeed filed and they see no reason the lot couldn't be subdivided  pending the necessary infrastructure was put in such as the sewer tap and sidewalk. The problem is my lender is having a fit saying that the owner can't sell a portion and keep a portion without the lot being subdivided completely first. The real estate agent for the seller says yes you can and that he does it all the time.  The lot that the seller wants to retain has been recorded and has an address but no legal description yet.  My question is can this be done? I intend on buying both lots in the long run and currently have an agreement with the seller to buy the other portion of land in a year. The problem is getting this thing financed with private money in its current state.   Thanks for all information.

Patti Robertson · Answer

The seller would have to subdivide it before the sale.

Patrick Orefice · Answer

@Lakeither Garner I would agree with the lender. It’s tough to buy/sell a property that doesn’t legally exist. It’s also difficult to value if a legal boundary isn’t set.

If you’re owner financing the lot later, could you owner finance the house lot while you begin your rehab and get the private money, if needed, after the subdivision is final?

Peter Walther · Answer

I believe you can close on the first purchase but your interest will be subject to the lack of government approval for the subdivision of the parent parcel.  If despite the indications approval will be forthcoming, something comes up that prohibits the subdivision, you may be stuck with an unmarketable piece of property and your title insurance policy may not cover the problem.  That's probably why your lender is insisting on approval before lending the money.

Guy Gimenez · Answer

If you're using someone else's money, they get to make the rules. I would do the same if I were the lender. I could are less what a real estate agent or city says, they can and often do lie. Ask me how I know.

Steve Morris · Answer

Well, two options:

1) You can do a land-lease and pay him rent.  Usually that only happens with burger joints and large buildings on expensive land.  I've run into only 2 smaller commercial projects in Portland like this in 15 years.

2) Wait until the re-plat (creating new tax lots) is done.  Those can take a looooooooooong time, but it'd work better for you and the value/marketability of the property.  Merges (combining tax lots) are not so bad.

Lakeither Garner · Answer

@Sam touroonjian  yes thats correct. However, we're also securing the second lot via owner financing. We just intend to rehab and sell the house that sits on the lot we're currently in contract on and proceed to closing on  the second lot and completing the subdivision application.

Sam T. · Answer

@Lakeither Garner so is the issue that you and the seller want to complete the sale before the lot is officially subdivided? Because your lender is right. If I were you I'd get an attorney's help seeing if there's a good way to write into the contract what exactly you're trying to do (complete the sale before the lot is legally divided, but already in agreement as to where exactly the division will be, and your agreement to only use the portion that will be yours) and see if your lender will accept the situation with that sort of verbiage in the contract.

Lakeither Garner · Answer

Yes the lot split is side by side  with the lot thats being retained has a driveway. The lot we're  purchasing first has the house on it. Just gotta see how to structure it so that the lender is happy.

Theresa Harris · Answer

@Patti Robertson  If the lot can be subdivided and the house is on one of the lots, yes they can.  It needs to be clear what is included in the sale and you should check with the city to ensure the house is located on one lot and how the second lot will be accessed (ie it is the back/front half they are keeping or it is split left/right).  The sales price should reflect what is being sold.

Can you buy a house and the seller keep a portion of the land?

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