Will a Bank Finance Landlocked Property?

If you are trying to buy or sell landlocked land in North Carolina please feel free to call me today. I have dealt with many landlocked land transactions.

Will a Bank Finance Landlocked Property?

Trying to get a bank to finance land is difficult, and it’s going to be even harder to do if the property is landlocked with no legally designated access point. The only reason a bank will lend money to anyone is if they feel confident that they will make their money back with profit, which is why interest is charged on a loan. It’s very difficult for someone to turn a profit with undeveloped land, which is a why a bank is hesitant to finance the purchase of that property. Land without legal access is even less likely to be profitable.

For a bank to approve financing on landlocked property, a solid case would have to be presented on how legal access to that land would be acquired, and what would be done with the land in order for the bank to get a return on their investment. If those requirements are met, the bank might consider the loan, but the chances are still slim.

If the bank isn’t interested, there are other options. Because of the risks involved, landlocked property is typically worth much less than equivalent land with proper legal access, sometimes being valued at only 20% to 30% as much. The lower price makes a cash purchase more feasible, but few buyers will have that much cash on hand for that kind of purchase. Seller financing is also an option. A legal agreement between the buyer and the seller, establishing scheduled payments on a defined value over a period of time until the debt is settled. This puts the risk on the seller, as the buyer may not be able to make the payments as needed.

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