A borrower sent me a deal last month. 40 acres, a plan for eight lots, and a spreadsheet that priced every lot at the highest asking price in the county. "So you can lend 80% of that, right?"
No. And the reason why is the whole lesson of this post. Here is exactly how I value land you plan to subdivide, what kills a deal, and what you can do to get the most loan the program allows.
How do lenders value land for a subdivision loan?
From recent sold comps for lots like the ones you will create, not from asking prices or your spreadsheet.
I start with recent sold comps near the parcel for lots the same size as the ones you plan to create. Sold, not listed. Then I check how long those lots sat on the market, how many took price cuts, and how many similar lots are for sale right now. All four tell me what your lots will really bring.
Why not an appraisal? Raw land appraisals take weeks and lean on the same sold comps anyway. We skip the appraisal and do the comp work ourselves, which is a big part of how we close in about 7 days.
Takeaway: your lots are worth what similar lots sold for, not what the best listing is asking.
Buying land to subdivide?
Subdivision loans from $30K to $1M, up to 80% of price when the plat records at closing, partial releases as lots sell. Written quote in 24 hours.
Get a Free QuoteSubdivision LoansWhy do market time, price cuts, and active listings matter?
Because a lot that takes two years to sell is worth less to a lender than one that sells in two months.
Sold comps tell me the price. Market time, price cuts, and active listings tell me how fast you can get it. If similar lots sell in 60 days at full price, the value holds. If 30 similar lots are listed, most have cut their price, and they sit for a year, your lots will fight all of them.
- Market time: how many days similar lots took to sell
- Price cuts: how many sold lots dropped their price first, and by how much
- Active listings: how many lots like yours you will be competing with on day one
Your loan runs 2 years. If the market says your lots will take three years to sell out, that is a problem for both of us. In my experience, the best subdivides are in counties where lots sell fast and there are not many on the market.
What kills a subdivide deal?
Bad access, a failed perc test, or not enough road frontage for every lot.
Any one of these can kill the deal. Every lot needs legal access. Every lot needs a perc test showing a conventional septic system will work. And every lot needs the road frontage the county requires. If one lot fails, your plan changes, and so does the value.
- Access: every lot needs a recorded road or easement, not a handshake with the neighbor
- Perc: a lot that cannot take a conventional septic system has fewer buyers and sells for less
- Frontage: most counties require a minimum road frontage for each lot, and you cannot split what you cannot front
More on perc in why you perc test every lot before you subdivide.
How much will a lender loan on a subdivide?
Up to 80% of the purchase price if the plat records at closing. Otherwise 65% at closing plus 15% when the plat records.
If your plat records at closing and every lot passes perc with a conventional system, we lend up to 80% of the purchase price. If the plat records after closing, we lend 65% at closing and advance another 15% when it records, as long as the value is there. The loan never goes over 65% of our conservative value.
| Plat records at closing | Plat records after closing | |
|---|---|---|
| Loan at closing | Up to 80% of price | 65% of price |
| Later advance | None needed | Another 15% when the plat records |
| Down payment | 20% | 35% until the plat records |
| Perc tests | Every lot shows a conventional system | Test every lot before you close |
| Value cap | Loan never more than 65% of our conservative value | |
Terms are the same as our other land loans: $30K to $1M, 14% interest only at $100K and up, 16% under $100K, 2 year term, $600 closing, 2% exit fee. Full details are on the subdivision loan page.
How can I get the most leverage on a subdivide loan?
Record the plat by closing, perc every lot, and buy at a price the comps support.
The 80% tier is there for borrowers who do the work before closing. Get the survey done, the plat approved, and the perc tests back during your due diligence period. Buy at a price well under the sold comps. And if you own another property free and clear, pledge it as cross collateral for up to 100%.
- Negotiate a long due diligence period so you can finish the plat and perc tests before you close
- Perc every lot, not just one test on the parent parcel
- Confirm access and frontage for every lot on the survey
- Buy right. The value cap is based on our comps, so a good price gets you the full loan
- Use cross collateral on one other property you own for up to 100% financing
I would avoid planning a deal around the 80% number and then trying to finish the plat after closing. You will need 35% down until it records.
What documents should I send for a subdivide quote?
The APN, the contract, your lot plan, and any survey, plat, or perc tests you have.
Send the parcel number, county, map coordinates, contract price, and a sketch of the lots you plan to create with their sizes. If you have a survey, a preliminary or final plat, or perc results, send those too. The more you send, the faster I can value it and the higher the number can be.
You can run your numbers first in the instant subdivide loan quote, then apply when you have a deal under contract.
Want to know what your subdivide is worth to a lender?
Get a Free Quote →Frequently Asked Questions
How do lenders value land you plan to subdivide?
Damen Capital values it from recent sold comps for lots the same size as the ones you will create, then checks market time, price cuts, and how many similar lots are for sale now.
Do you need an appraisal for a subdivision loan?
Not with Damen Capital. We value the land from sold comps ourselves, which is part of why we can close in about 7 days.
How much can I borrow on a subdivide?
Up to 80% of the purchase price if the plat records at closing and every lot passes perc. Otherwise 65% at closing plus 15% when the plat records. The loan stays at or under 65% of our conservative value.
What kills a subdivision deal for a lender?
Missing legal access, a failed perc test, or not enough road frontage for every lot. Any one of them changes the lot plan and the value.
Can I get 100% financing on a subdivide?
Yes, if you pledge one other property you own free and clear as cross collateral.
Related Reading
- Subdivision loans: buy land, split it, sell the lots →
- How partial lien releases work on land loans →
- Minor vs. major subdivision →
- Why you perc test every lot before you subdivide →
- Land split vs. subdivision →
- How long plat approval and recording take →
- How much it costs to subdivide land →
- Sell subdivided lots fast with seller financing →