Idaho Real Estate Practice Exam

What is a primary consideration for lenders when financing large properties like a farm in Idaho?

1. The agricultural value of the land

2. Historical ownership records

3. The potential for residential development

4. The structure of the loan terms

The correct answer is: The agricultural value of the land

A primary consideration for lenders when financing large properties such as farms is the agricultural value of the land. This value is pivotal because it directly impacts the property's productivity and profitability, which in turn affects the ability of the borrower to repay the loan. Lenders assess the land’s capability for various types of agricultural production, including crop yields or livestock, which provides insight into the potential revenue generated by the property. While historical ownership records can provide context regarding the property's title and any issues related to ownership, these records do not reflect its current or future earning potential. Similarly, the potential for residential development may be an interesting aspect, but it is not the primary concern for lenders focused on agricultural financing. Lastly, the structure of the loan terms is crucial for the management of repayments but is secondary to understanding the core asset's value—here, the land’s agricultural function and worth are of utmost importance in assessing risk and making lending decisions.