Selling Part of a Property Financed by a Mortgage Company

I have six acres with a house on it and financed through a mortgage company. I would like to sell just one acre, do i need to report it to the morgage company or just sell the one acre.

1 Answer

This depends largely on how your property is deeded – that is, does the town or county have it recorded as two or more separate parcels of land? Is it taxed separately from the house? Was it bought or acquired separately?

If so, you may own certain sections outright, and you may be able to sell off sections of the property that were NOT mortgaged when you mortgaged the house. Check your local registry of deeds if you are unsure.

If the entire property is recorded as a single parcel, however, and the mortgage lender lent you money based upon the value of the house with the lot as a whole, then you must obtain their permission and “subdivide” the lot – and you have some hoops to jump through before you can sell a portion of it off.

You may first wish to contact your county / local government zoning office to obtain their list of requirements for subdividing the property. You will need their permission to go any further, regardless of the mortgage lender’s response, and depending upon where your property is located, they may be an excellent resource for you throughout the process.

Then you will need to request and receive a “ partial release” from the lender. This process can be time consuming, and your request does not have to be granted: The lender made a decision to lend you money based upon the value of the WHOLE PARCEL of land – if you reduce the size of the lot, the value of their collateral (the home and lot) may also be reduced below their comfort level.

Check your mortgage paperwork – there is a good chance that somewhere in the mortgage or the deed, there is specific language alluding to the above under “Transfer of Rights in the Property”. Most likely, it reads something like this:

“The Borrower does hereby grant convey to Lender, with mortgage covenants, the land and buildings situated thereon and all improvements and fixtures now and hereafter a part thereof having a street address of [YOUR ADDRESS] and described as follows  [YOUR PROPERTY DESCRIPTION]. . . “

In plain language, the lenders are roughly telling you that they have mortgaged ALL of your property, and that you cannot subdivide and sell any of it without their express permission to do so.

Each lender or servicer may have a different method for processing these requests – you will need to ask them directly (and repeatedly, in some cases, as many entry level customer service reps may not be trained to properly address this question).

The lenders and/or  zoning officials may also ask for additional information – such as a survey of the property (to clearly define the boundaries  as is and as proposed), and a new appraisal of the home and reduced lot to make sure that the new value still supports the debt that you carry (the mortgage). These will likely be at your expense – best to price these services out ahead of time.

Complexities notwithstanding, if you are willing to do the legwork, it MAY be possible, and even profitable, for you to sell off a portion of your land. . . but if your property is on a single deed, it is likely neither quick nor easy to do so.