A New Hampshire buyer, David, is purchasing a 150-acre parcel enrolled in Current Use. His lender requires a standard appraisal for mortgage underwriting. The appraiser values the property at $450,000 at full market value and at $180,000 based on its current use assessment. David's agent warns him about a potential issue with financing. What is the most likely concern the agent is raising?
Correct Answer
B) The lender may require the loan to be underwritten based on the full market value appraisal, but a future land use change tax could reduce the property's effective equity
The agent's concern relates to the financial risk created by the land use change tax. If David ever removes the land from Current Use — for development, subdivision, or other reasons — a land use change tax of 10% of the full market value ($450,000 × 10% = $45,000) would be triggered. This liability effectively reduces the property's net equity and could affect David's ability to refinance or sell. The lender underwrites based on the full market value appraisal ($450,000), but the potential land use change tax liability is a material financial risk that affects the true cost of ownership and the property's encumbered equity position.
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Related Topics & Key Terms
Key Terms:
Related Concepts
Continuing education (CE) refers to the ongoing coursework that licensed real estate professionals must complete during each renewal cycle to maintain an active license. CE ensures agents stay current with changes in laws, regulations, and industry practices.
The National Do Not Call Registry is a federal program administered by the FTC that allows consumers to opt out of receiving unsolicited telemarketing calls, including calls from real estate agents soliciting business.
Brokers in Florida have strict responsibilities for managing escrow accounts, including monthly reconciliation and proper handling of trust funds.
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