Ag vs. Res Zoning

[Kim Anderson]

I am looking at a 120 acre parcel which is zoned Ag. I am thinking about carving it up to create 5 acre tracts to sell. Buyers could then put a mobile home on their tract and that would be consistent with the other smaller tracts surrounding this one.

I have been told that it would be a good idea to go ahead and get the parcel changed to residential zoning. However, when I spoke to the county zoning administrator, he stated that a mobile home could go on a 5 acre tract with the current zoning of Ag. Is there any valid reason for changing the zoning to residential if it is not necessary for the intended use?

[Dave Rossman]

Kim,

I have been in the lending industry for many years, from a lending stand point AG is considered be a higher risk & underwriting tends to be much more conservative on AG zoning versus commercial or residential zoning i.e. lenders in this market may lend on land up to a 50% leverage, however, AG zoning the leverage will be held to 25%-30%. The underwriting thought is that there is a smaller market of buyers for AG zoned land & the usage is somewhat restricted to what these potential buyers may do with that land. Bottom line in the event of a foreclosure/fire sale of the land the lender most likely would have to make some large concessions to move the asset off their books. I hope this helps going into & out of this asset.

Best of Luck,

Dave