Can land equity be used in lieu of cash to close?
Yes. Existing land equity can be used. Determining equity is done in two ways. Depending on how long the borrower has owned the property, either the purchase price or market value will be used to determine equity. If the borrower bought a piece of land for $40,000 one year ago and today it is appraised at $20,000, the equity is $20,000. This holds true even if the market value of the property is $60,000 today, because of seasoning. Market values can be used to calculate equity if the borrower has owned the property for or more than two years. Land comps will be needed to justify both market value and purchase price.
Related Questions
- Will the Planning & Land Services Department accept a personal check or cash in lieu of obtaining a bond or assignment of funds from a financial institute?
- What rate is used for cash settlement of equity index CFDs on the expiry date?
- Can expenses incurred prior to closing be used in lieu of cash to close?
