Doing a 12 mo bridge loan on a house purchase which is primarily secured by farm real estate. To ensure the bank is fully secured without a doubt, loan officer also wants to take the house being purchased. Because the home truly is secondary collateral, is an appraisal required? It doesn't matter what the value is to us because we have the farm RE.

One point to consider: is this house being taken truly as an abundance of caution and it is the file documented as such? If it is, then you might not need an appraisal.

If this is a consumer loan, I am going to defer to others' opinions.

Well which is it? Is it a condition put on the loan by the loan officer for loan to value purposes or is the borrower volunteering the additional collateral for better terms?

One would assume the appraised/evaluation value of the farm land would erase any doubt of the bank being fully secured.

If the loan officer has doubts about the loan without the additional security then I think you would be hard pressed to classify it as abundance of caution.

If it truly doesn't matter to the bank, then why go through the hassle?

Your statement contradicts itself - You can't say "to ensure the bank is fully secured" and then to say "doesn't matter that the value is because we have the farm". If the secondary collateral is being taken as an abundance of caution (which is exempt from valuation requirements) you need to state that and back it up with the facts related to the value and loan to value of primary collateral. If the value/LTV of the primary collateral doesn't fall with your bank's loan to value guidelines then the secondary collateral couldn't be ABC. If that is the case you would need the proper valuation.

The cause for concern regarding the farm real estate is that there is an undivided half interst involved. This is the only reason for loan officer's desire to secure the house as well. Condition of loan simply b/c there is another owner on farm and there is the potential for a mess. I think we can prove that the house is an abundance of caution. And, yes it is a consumer loan. Thanks for all the input - any more would be appreciated.

The cause for concern regarding the farm real estate is that there is an undivided half interst involved. . . . Condition of loan simply b/c there is another owner on farm and there is the potential for a mess

The other "half interest/owner" has to sign the security agreement pledging the farm land so what is the potential mess?

I would respectfully challenge the secondary collateral is not being taken as an abundance of caution.

Most bank's will not take such collateral to begin with. It is awful hard to foreclose on and sell a partial interest.