Funding a Farm / Agricultural loans

tractor, rural, farm-385681.jpg

funding Farm and ag properties?
Posted by: NathanGustafson Sep 3 2004, 12:27 AM
I am a loan officer in Oregon and one of my clients is trying to purchase property on the coast.

The problem I am running into is that every place she is interested in is zoned EFU – Exclusive Farm Use. One location consists of two tax lots, 5 acres each, both are covered with trees. Another location has 15 acres with a house that she would like to tear down and rebuild, and a third has 40 acres. All of these properties are selling for around $300k. All three properties have houses.

She is planning to clear and sell some of the trees so that she can bread her two horses as a source of revenue on the side from her primary job. The property will be an owner occupied primary residence.

What kind of advice can you offer me in ways to fund one of these properties for my client. one of the owners is willing to carry some of the loan but my clients needs as close to 100 CLTV as possible.

Are you aware of lenders who offer products for this. How difficult is it to change the zoning and how do I go about doing that? I know there are ways to aquire permits to bypass the zoning but I have no clue where I would go for that.

If you don’t have an answer ideas on going about it would be appreciated. I have been searching the farm loans and ag loans as was suggested in another post. (that is how I came to your site…)

Nathan Gustafson
Loan Officer – Oregon
Posted by: Commercial Lender Sep 3 2004, 01:16 AM
“one of the owners is willing to carry some of the loan but my clients needs as close to 100 CLTV as possible”

You are going to have a very tough time (AKA the time you will end up spending on this deal is not going to be worth the payoff….. in my opinion). First, only a few-literally a few-lenders touch ag properties. Farming cooperatives will finance Farmland but for actual farmers. To give you a different perspective, if this lady defaults the lender is essentially left with just the land which as you know take forever to sell. If a lender specializing in land purchase/development takes a look, i doubt they will be interested (esp with a 100% CLTV – she has no personal interest) given that its zoned Farming use only. Try a local community bank or credit union, they know the area better and are more apt to funding local properties but warn your client that she will need 10-20% of her own money at the very least.
Posted by: loanuniverse Sep 3 2004, 10:38 AM
When you say “one of the owners is willing to carry some of the loan but my clients needs as close to 100 CLTV as possible”, How much is ”some”? What kind of LTV can the lender in senior position expect?

Can you try to sell this on the basis of collateral strength as well as adequate source of repayment from her regular job? A lot of lenders will look at it if their loan-to-value is right even for a property that is mostly land I would think, but I wouldn’t expect anything higher than 50%.

Living in a very urban setting, I don’t deal with farms very often and when I do deal with agriculture related deals is mostly for nurseries and never for anything residential, but I don’t understand why you as a loan officer would go through the trouble of trying to get zoning changes, that kind of work alone is worth a few hundred dollars at least.

Author: Commercial Loan Underwriter