Contiguous

Contiguous means sharing a common boundary or border. In real estate and mortgage note investing, the term describes parcels of land that physically adjoin one another. A single mortgage may be secured by contiguous lots, or an investor may encounter contiguous parcels as a factor in valuation and disposition strategy.

Why Contiguous Matters in Note Investing

Understanding whether a property is contiguous to other parcels owned by the same borrower — or whether the collateral itself consists of multiple contiguous lots — affects due diligence, valuation, and exit strategy in several ways.

Collateral Secured by Multiple Lots

Some mortgages, particularly in rural areas or for land loans, are secured by more than one parcel. When those parcels are contiguous, the combined acreage typically supports a higher BPO or appraisal value than if the lots were scattered in different locations. During due diligence, investors should confirm:

• Whether the legal description in the mortgage covers all contiguous parcels
• Whether each parcel has a separate tax ID or is assessed as a single unit
• Whether any of the parcels have been sold, subdivided, or transferred since origination

A gap in the legal description — where one of the contiguous parcels was excluded from the security instrument — can significantly reduce the collateral value backing the loan.

Disposition Strategy for Non-Performing Loans

When a borrower on a non-performing loan is not interested in keeping the property, the owners of contiguous lots become natural prospective buyers. Neighboring property owners often have the strongest motivation to acquire an adjacent parcel — whether to expand a yard, add a buffer, or consolidate land for development.

Reaching out to contiguous lot owners is a low-cost, high-conversion marketing tactic. A simple letter or phone call to a neighbor saying "the lot next to yours may become available" can generate a sale faster and at a better price than listing the property on the open market.

Contiguous vs. Non-Contiguous Parcels

Contiguous parcels share at least one boundary line. Non-contiguous parcels are separated by land owned by a third party, a road, or another barrier. The distinction matters because:

• Contiguous parcels can often be merged into a single tax lot, simplifying ownership and increasing utility
• Non-contiguous parcels secured by the same mortgage create more complex lien and foreclosure scenarios, since each parcel may need to be addressed separately
• Appraisers and BPO agents value contiguous land differently than scattered parcels, even when the total acreage is identical

Practical Tip

During the collateral file review, cross-reference the property's legal description against the county assessor's parcel map. Identify all contiguous lots, their ownership, and their assessed values. This information feeds directly into your valuation model and your post-acquisition disposition plan — especially for vacant land and rural properties where contiguous acreage is the primary driver of market value.