“Providers Of Land Servicing Loans Primarily Focus On The Value Of The Land And The Exit Strategy For Repayment”

We arrange land servicing loans for our clients in Toronto, the Greater Toronto Area, and parts of Southwestern Ontario.

While there is a considerable list of items that a lender for land servicing will focus in on, the primary areas of initial interest are the current fair market value of the land and the exit strategy that will drive repayment of the loan.

With respect to market value, its not uncommon for a particular development to be in the middle of a planning process with either a draft plan of subdivision in place or something that would resemble the same.

In these situations, the construction financing source is going to be looking to determine what the value of the land is today in the current state of planning, what the land is going to worth when final plan approval is in place, and what it will be worth upon installation of services.

For installation of services, if there are multiple phases of construction, unless all phases are going to receive land servicing at the same time, a commercial appraisal should reflect the market value of each phase individually versus providing a market value for the entire development once services are installed.

This is due to the fact that lenders will likely structure their draws to align with phases of development and want to know that at each completed phase that the property has appreciated in value sufficiently to provide the security they require to move forward with further advances.

At the other end of the equation is the exit strategy to repay the loan in the future.

All land development exit strategies are going to involve the resale of all or part of the property requiring the land servicing loan, so the strength of the exit strategy has a lot to do with who the potential buyer or buyers are, and how strongly they are contractually committed to a purchase once land servicing is completed.

Taking this one step further, in situations where there a single builder prepared to acquire lots over a period of time, the financial strength of that individual company will be extremely important to any lending/funding decision.

While not automatically the case, more arranged buyers or conditional sales to financially strong buyers, presents a stronger, lower risk exit strategy to potential lenders.

Once again, there are many other aspects of the development that a lender will focus in on, but if the market value and exit strategy cannot support the deal, the other factors will not make much difference.

If you require a land servicing loan, I suggest that you give me a call so we can go through your requirements together and discuss potential land servicing loan options available to you.

Click Here To Speak With Toronto Mortgage Broker Joe Walsh For A Free Assessment Of Your Land Servicing Loans Options

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