BANKERS & OLD FARMS

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Issue # 174- June/July 1999

Finding funds for hard to finance rural property.

by Michael J. Stacy Blackwell

One day, a little road takes you to a gravel drive with "For Sale" sign next to it. You follow that drive up to an old,dilapidated house with sagging porch, rotten steps and broken windows. But look here-a straight roof line and plumb doors, a bold spring in a concrete box-and there, behind the house, a small orchard. Some gestalt mechanism in a far recess of the mind whirs and clicks: home. After two years of searching, my wife and I knew this small homestead in Virginia was the place for us. Then we called our bank.
We had been active members of this bank for almost our entire lives. It held all of our savings. We had obtained in surance, car loans and charge cards there. Our credit was perfect. I was certain we'd be approved for a loan. How could our banker-practically a member of the family-say no? Easily, it seems.

Improved property, i.e., property with a house on it, is a better risk than unim proved property. And the more improved the house itself is, the more improved your chances of sharing a hearty hand shake with your lender.

> Despite sagging porch and rotting steps, it was love at first site for the Blackwells.

Loan officers like known quantities. They get more uncomfortable than a seventh-grade tuba player at a Sadie Hawkins dance when you tell them a house has no water, no wiring, an out house and an address that references your neighbor's barn. The good news is that there are people and institutions that will lend money on the property you want to buy. You just have to find them, convince them you're a good risk-then pay them.

I'd like to pass along some of the things we learned in the process of buying our Virginia homestead. Consider the following a general introduction to financing rural property. This is a complex subject, complicated further by regional differences in land use, Don't hesitate to retain a qualified lawyer, financial planner and/or buyer-broker.

Dealing with Bankers

The term mortgage arises out of the Latin root for death. It seems if you didn't fulfill the terms of your medieval mortgage, a nice man would come from the central banking district and kill you. The financial services industry has mellowed over the years, but, still, proceed with caution. Do your homework and always read the fine print. When you borrow money, the lender demands collateral or security-an asset that it can convert to money if you default on the loan. In most real estate transactions, the property itself serves as the collateral. Because the market for rural property is