4 Things to Know When Closing on a Rural Texas Land Loan
If you’re in the process of purchasing land in rural Texas, there are several important things to consider when closing on a land loan. It’s tempting to think that starting the process and entering into an agreement means the rest of the process is set up to coast smoothly to closing, but there are still some very important things to look out for.
Here are four important things you should know about before signing on the dotted line of your Texas land loan.
Property Surveying
Before signing your land loan, it’s essential to have a property survey done to determine the exact boundaries of the property. This survey will identify any encroachments or overlaps with neighboring properties and ensure that you know exactly what you’re purchasing. It also should show any structures that would transfer with it.
A lender may deem an existing survey adequate for review, but purchasing a new survey for a new Texas land loan is usually recommended.
Easements
An easement is a legal right that allows someone to use a portion of a property they do not own for a specific purpose.
This could include utility easements, which allow utility companies to access and maintain their equipment on your property, or road easements, which allow neighboring landowners to use a portion of your property as a right-of-way to access their property.
Easements may exist for things like railroad tracks, power lines, drainage, access, and more. To discover what easements may affect the property, you can review a survey of the property, any plat affecting the property and/or Schedule B of your title commitment.
It’s important to understand any existing easements on the property you’re purchasing, as they will transfer over onto your rural land loan. This way you can ensure that the easements won’t impede your intended use of the land.
Liens
A lien is a legal claim against a property, usually by a creditor or a contractor who has performed work on the property. Before closing on a land loan, it’s important to ensure that there are no outstanding liens on the property.
When a property that is subject to a lien is sold, the lien must be discharged (by payment of the money owed, for example). Otherwise, if the lien is not discharged, the lien will stay attached to the property, even after the sale, and can be foreclosed to enforce the obligation(s) it secures.
To find out if there are any liens against the property that need to be paid before the title is conveyed to you, check the title commitment.
Flood Zone Determination
Flood zones are areas that are at risk of flooding, and properties located in flood zones may be subject to additional requirements and insurance premiums.
Before closing on a Texas land loan, your lender may order a flood zone determination from a third party specializing in flood determinations such as LERETA. Flood insurance rate maps (FIRM) will help identify if your property is located in any special flood hazard areas. Maps are also provided online by FEMA.
Work With Rural Land Loan Closing Professionals
At AgTrust Farm Credit, we understand the unique challenges and opportunities that come with purchasing rural land in Texas. That’s why we’re committed to helping our customers navigate the land-buying process, from securing financing to closing the deal.
When it comes to closing on a land loan, it’s important to work with experienced professionals who can help you navigate the complexities of the process. At AgTrust Farm Credit, we’re committed to helping our customers succeed in the land-buying process. Contact us today to learn more about how we can assist you in securing the financing you need to make your land ownership dreams a reality.
Transcript from Aaron Nors
This is the transcription of Aaron Nors’ “4 Things to Know Before Closing on a Land Loan” video tutorial above.
Hi, my name is Aaron Nors, Farm and Ranch Lending expert with AgTrust Farm Credit. For more than 100 years, AgTrust Farm Credit has helped farmers, ranchers, and folks like you finance your piece of Texas. There are many things you need to know before buying a piece of rural property. Today we are going to talk about four main things that you should know.
Survey
Number 1 is a survey. You need to have an accurate survey of the place you are buying before we can close. This can be an existing survey, it doesn’t always have to be a new one. So long as it accurately describes the place being purchased. However, if your property is being cut from a larger tract, or if you are concerned about the location of boundary lines or fences, you’ll definitely want or need to get a new survey. A new survey can also be helpful to identify the location of fence lines, building improvements such as houses and barns, floodplains, and other easements on your property. The cost of a new survey can be paid for by the buyer, seller, or split between the two parties.
Title
Number two is the title. You want to make sure you have a good, clean title to the ranch you are buying. Most real estate transactions are closed through a local title company. The title company helps assist with a number of things. They will do the research on the property and provide the buyer and lender with a title commitment. This title commitment will make everyone aware of any easements, deed restrictions, existing liens, leases, or any other matters of record related to the property. Then, when it is time to close, the title company will make sure that any existing debt owned by the seller is paid in full, so you as the buyer don’t have to worry about it. Also, they will safely handle the exchange of funds between the buyer, seller, and lender. And get the deed to your new ranch recorded with the county.
Easements
Number three is easements. Easements are also something you need to consider when buying a piece of rural property. Easements can be beneficial such as when your property is located off a public road and you’d need a roadway easement to access your new property. Utility easements can also be beneficial to help you get a water meter or electric meter in place. Easements can also be undesirable such as when there is a pipeline or a transmission line easement across the center of your property. Once an easement is established and recorded with the county, it can be very difficult or impossible to get rid of and not all easements are visible to the naked eye. This is another reason why the survey and title commitment mentioned before can be so helpful. They help you understand the easements on your property and their location.
Flood Zone
And finally, the fourth thing to know about your new farm or ranch: is anything located within the flood zone? Having a portion of your new farm or ranch in the flood is not inherently a bad thing. In fact, most properties located on a river or large creek have a portion of the land located in the flood zone. If you have a mortgage on your place, existing or proposed new buildings that are located in the flood zone are required to have insurance by FEMA. The cost of flood insurance is an expense you need to be aware of before you choose to buy. Your lending expert with AgTrust Farm Credit can help you better understand the location of the flood zone on your property. Also, a new survey can help better illustrate the boundary, if needed.
If you would like more information about financing your piece of Texas, you can reach out to your local lending expert or visit us online at AgTrustACA.com.
About AgTrust Farm Credit
AgTrust Farm Credit is a full-service cooperative lender headquartered in Fort Worth, Texas, that specializes in financing rural land and agricultural operations. We have 19 office locations serving 81 counties in Texas and New Mexico, $2.9 billion in assets, and are a member of the nationwide Farm Credit System.
At AgTrust Farm Credit, we understand the needs of farmers, ranchers, agribusinesses, and rural homeowners because we live and work in the areas where we serve. Our loan specialists also help those in urban areas who aspire to find their ideal home in the country.