We are considering making a loan in excess of $250,000 and the collateral is an undeveloped parcel of land that will be divided up into ten lots for sale to home builders/consumers. The lots will be identical. Can we obtain an appraisal on one or two lots and use that figure as a basis X 10 to have a value of the entire parcel? I can see where the value of the one may not be the worth of the whole. They are wanting to do it this way to save $$$ on the appraisal. I suggested that they do ten loans, but I don't think that will fly.

Who would purchase a lot in an undeveloped parcel? It is like having 5 acres of land that I plan to divide into 1/2 acre lots but I haven't yet subdivided the parcel. How can I then sell a lot until it is subdivided? Once the 5 acres is subdivided and developed, corner lots will have more value than non-corner lots and lots on a cul-de-sac will have more value than lots that are not so located. Lots with a view or that have a lot of trees or, or, or...will have more value. Until the property is developed it is a waist of time valuing the property per lot. Now, if this is a development loan and you will have a first lien position in the land, then you value the property per each anticipated lot and don't exceed 75% of the value of all lots in doing the development loan. But if it is just secured by the parcel don't value per lot, because there are no lots.