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Rachel Bevill-Cottrell | 2022-08-04

How Can I Split A Parcel?

How Can I Split A Parcel?

Are you a landowner, or soon to be a landowner? If so, you may have questions about splitting up a parcel. Maybe you just inherited a property and you’re trying to split it between siblings, or maybe you’re just curious about the process and wondering if it would make financial sense to section off some of your land.

Splitting up a parcel is generally referred to as subdividing land. While subdividing land may sometimes carry the connotation of commercial subdivisions, this term actually refers to many different types of land division, big and small.

There are many reasons why you might want to split a parcel, and many different ways to do it. This article helps answer some of the most common questions about splitting a parcel.

What Does It Mean To Subdivide a Parcel?

Splitting a parcel, or subdividing a parcel, refers to taking a piece of property and dividing it into smaller tracts. There are many different methods and reasons to subdivide land, and they may be applicable to your situation.

Before beginning your subdivision journey, it is best to speak with a title company about state and county guidelines in your area that may dictate what you can and cannot do with your land. There may be zoning laws, neighborhood covenants, local ordinances, or deed restrictions in place that could limit how you split your parcel.

Why Would You Divide a Parcel of Land?

Generally, the main reason people subdivide land into parcels is to maximize the value and improve the marketability of their property.

If you own land, there may be a section of it that is valuable, but you may not be utilizing it. Subdividing that parcel off so that you can sell it to a new owner, who may not be able to buy a large tract of land, could be beneficial to both you and your buyer.

Ideally, the more smaller lots you sell, the more money you can make. If you are trying to maximize the value of a larger tract of land, splitting it into smaller parcels may be the best way to get the highest value because it will provide multiple buyers for multiple tracts.

While some people do look for larger tracts of land to buy, most people only want a few acres. Subdividing a large parcel of land allows those buyers to get the property they want without the excess land to manage.

You may also want to divide your parcel so that you can build two homes and have two addresses. Generally, when you build more than one home on a property, you can only have an address if the parcels are split into two tracts.

This method of subdivision is more about legality than it is about making money, and should be researched thoroughly so that you understand the different regulations in your area regarding homesteads. Consider starting here:

  • Speak with a land agent about the marketability of your property and whether this is the right move for you. An agent will also be able to give you recommendations on how to proceed to the next step.
  • Call a surveyor. If you don’t already know a local surveyor, visit the National Society of Professional Surveyors website or ask your agent for recommendations.
  • Consult with the municipal planning and building township, typically at your local courthouse, to fully understand the zoning laws in your area.
  • Do a title search through a reputable title company. If you do not know which title company to use, online research can give you a local starting point, or you can speak with your agent for personal recommendations.

How Do You Divide Land Between Family Members?

If you’ve inherited some land along with other family members, it is likely that each family member will have a different need or goal for their portion of the land. Officially subdividing that land may open the door to more opportunities for each member of the family. It is important to seek professional legal advice before beginning this journey.

While you may want to keep your portion of the land, a sibling may want to sell theirs. Even if every member of the family that inherited land wants to keep it, it is still a good idea to legally split the parcels into new ownership.

Goals or intentions may change. Some day, you and your family members may have families of your own who will inherit the land that you now own, and their intentions may be different than their siblings.

If you fall into this category and you are looking to subdivide your inherited land, you will generally follow the same steps as any other subdivision.

Can You Divide Land With a Mortgage?

The short answer: yes. You will have to jump through more hoops because you’ll have to get the bank’s approval first, but it is common practice for someone to subdivide land with a mortgage.

Because selling off a smaller parcel may be profitable if the conditions are right, this route has the potential to help pay for the remaining mortgage on your property. Never try to do this without your bank knowing because the consequences can be detrimental.

If you go behind your lender’s back and begin selling off portions of your property, your lender may initiate a demand feature, which would require you to pay the full amount of your mortgage in a very short period of time.

This is because, while selling a portion of your property may be profitable to you, your lender would see this as reducing the value of the land that they have loaned you money to buy. If you were to pocket your profits from the subdivision rather than paying off the original loan, then the bank could view your property as less valuable than before the subdivision.

If you are wanting to subdivide your mortgaged property, here are some initial steps to consider:

  • Speak with your bank. Your bank will need to sign off on anything you do with your property, so rather than working against your lender, work with your bank to eliminate any legal misgivings.
  • File the appropriate paperwork to get a partial release of your mortgage. Note: This does not mean that your mortgage will go down. You will still owe the bank whatever you originally borrowed.
  • Consider consulting with a lawyer. Each lender will have different rules and regulations on subdividing mortgaged properties. Seeking legal counsel will help you better understand your contracts with your lender.
  • Understand your state regulations and come prepared. Your bank is going to want to know how the land is being used, whether there are any zoning laws in your area that would create legal qualms, and whether there are any current liens on your property. They may also require that you have your property appraised before the subdivision occurs.

How Much Does It Cost To Split a Parcel of Land?

Splitting a parcel will cost you money up front, but it may be worth the investment. As long as you do your due diligence and understand the fees associated with filing for a division, this may still be an option for your property.

Here are some fees to be aware of:

  • Paperwork fees for subdividing the land
  • Cost of surveying the land
  • Cost of appraising the land

Ultimately, the total cost of subdividing your land will vary based on the locality of your property. Researching local fees on your own will give you a better idea of how much the entire endeavor will cost.

To get a better idea of how much the subdivision will cost, contact your local municipality or township planning office. Generally, speaking to a real estate professional is a good first step, but you can also contact your local courthouse for more guidance.

Are There Any Cons to Subdividing Land?

Yes and no. Of course you wouldn’t want to do something with your land if there were to be negative impacts, so understanding what could happen when you subdivide and sell a portion of your land is important.

First, consider what the new buyers may do with the portion of land that you sell. Are you a private person who doesn’t want close neighbors? If so, then there is a possibility that selling a portion of your land could negatively impact your quality of life.

Would it bother you if a noisy neighbor moved in next door? Sound pollution may not be an issue if you own a significant amount of acreage, but if you sell off a piece of that property and the new owners are somewhat noisy, would that be an issue?

Second, understand the quality of and natural resources on the property you’re considering lotting off. All land has value, and some day you may regret losing the value of the property you divided and sold.

Are you in a rapidly growing area that may significantly boost the value of your property within the foreseeable future? Are there natural resources, like water frontage or mineral rights, that you may regret losing? If so, holding onto your property may be the best course of action.

Third, will your children want to inherit your property? Consider the long term benefits of holding onto the land before making a rash decision for a quick profit.

Final Thoughts

Once you have decided whether splitting a parcel is the right move for you, here are some simple steps you can take to make sure that you are covering all of your bases:

  • Do your due diligence to understand if there will be any extra paperwork involved; if you have a mortgage, the steps will be different.
  • Consult with the municipal planning and building township to fully understand the zoning laws in your area.
  • Learn about the fees in your area associated with dividing a parcel to avoid getting hit with unexpected costs.
  • Consider how splitting a parcel may impact your land value, quality of life, and long term goals.

Splitting a parcel may have many uses and benefits, but you shouldn’t make this decision on a whim. However, once the decision is made to subdivide, the rest is simple. If you’re considering subdividing your land, our AcrePro Land Experts can help.