Owner Financed Land: All the Information You Need to Know Before Making a Purchase:

When purchasing land, it is wise to keep an eye out for owner-financed land. It offers numerous benefits and is advantageous to both the seller and the buyer. Continue reading to learn more about owner-financed property, including when to utilize it, what to avoid, and how it might benefit you.

Why Do People Search for Land Financed by Owners?

Obtaining a bank loan or mortgage is challenging for the majority of common land acquisitions.

Banks may lend money in certain situations if the property in question consists of a sizable tract of land—1000 acres or more—plus an established, multimillion-dollar business, such as a prosperous ranching operation. A purchase worth $500K or more makes it worthwhile for the banks to spend the time conducting extensive due diligence.

Nevertheless, banks are usually not interested in many unoccupied land sales for first-time buyers, couples looking to diversify their assets, or families looking to live off the grid.

Certain construction loans, such as VA loans, are available and occasionally will finance a combination of a house and land. Strict guidelines govern what can and cannot be built. However, several of our clients have collaborated with them to obtain financing for a house and land combination.

Purchasing Land Financed by Owner:

The brilliant solution to the issue of financing shortages for land transactions is owner-financed land, also known as seller-financed land.

In essence, the land’s sale or owner acts as a bank and will “loan” you the money. Instead of demanding that you pay the entire cost upfront, the owner will take a down payment and let you pay the remaining balance over time to become the owner of the land.

In actuality, the seller is providing you with a loan rather than the bank.

The specifics of utilizing seller financing to purchase land are as follows:

The land selling contract is signed.

The owner receives the deposit.

A promissory note (which includes the interest rate, repayment schedule, and default penalties) is signed by the buyer and the seller.

Most of the time, the buyer and seller negotiate directly, and most sellers are willing to work with any owner-financed land purchase that comes along.

Let’s look at an illustration of a land sale that was owner-financed:

Assume that property “x” is listed for $15,500.

It may be a property that you and your friends would like to use for weekend hunting and that you will eventually find to be a wise investment. However, you don’t have an extra $15,000 lying around.

“I can give you $5K now and pay you $500 a month for the next 21 months,” you tell the merchant.

The vendor may respond in the affirmative.

Alternatively, they could counteroffer by saying something like, “I will take $7K down and $1000 a month for the next nine months.” or a different variant.

It is essentially a negotiation. To try to get a fair price, you hash things out between you.

Owner-financed land transactions let you purchase several properties at once.

Consider the following situation: the purchase costs $15,500, but you have saved $5K.

What happens if you find three properties that you would like to purchase? You now need to locate $40–$50K.

You still won’t be able to get a bank loan for this. To buy all three at once, you might be able to work out an owner-financed land deal, but.

Perhaps you can acquire a few thousand from relatives or friends, but what about the remaining amount?

Even if you decide to give up your pricey morning lattes, the bargain will expire and prices will have increased by the time you have saved enough money.

It is preferable to enquire about the owners’ consideration of an owner-financed land sale.

For instance, you might give each owner of a property $1K down and $750 a month for x months.

While some vendors will agree to this, others won’t.

Some can demand a larger interest rate, a larger down payment, or higher monthly payments.

However, you can own three plots instead of just one if you can arrange an owner-financed land contract with each of them, assuming you can afford the repayments. It is evident how appealing owner-financed land sales are. You might desire the land for your personal use in certain situations. Sometimes you might want to come land to work on a project. For instance, you might want to purchase 40 acres, divide it into four 10-acre chunks, sell three of the parcels for a profit, and keep the remaining one for yourself.

Additional Benefits Of Owner-Financed Land Transactions:

Deals on land financed by the owner have numerous additional benefits. Here are a few of them:

flexibility in negotiating a price between a buyer and a vendor

less expensive than paying large bank fees, broker fees, closing charges, loan arranging fees, and high interest rates (fees and hidden costs when acquiring lending through an institution can be hundreds of dollars)

A transaction that is quicker, simpler, and easier:

The majority don’t (though some sellers do; be sure to check ahead of time).

first dibs on the asset. The majority of owner-financed land purchases let you use the land immediately, even while you haven’t made the final payment. This implies that you can camp there, use it for ATV rides, bring mountain bikes, and launch drones as soon as you sign the contract and pay the deposit.

Where Can I Find Deals Financed by Owners?

With rare exceptions, most properties listed on the Multiple Listing Service and purchased through realtors are cash transactions. Looking at land for sale by the owner usually increases your chances of locating owner-financed offers. These can be found by checking Craigslist or on specialized sites like ours that acquire vacant land. You can also find them by looking for homemade signs on the property itself.

Individual Loans:

See if there are any private lending options available. Maybe any of your friends or family would be willing to lend you $5,000? Maybe you can acquire a credit card with 0% interest for a full year (just make sure you pay it off in full before the 0% term expires). You might look into crowdsourcing lending firms like Prosper. If you’re searching for recreational land, maybe you and your friends want to purchase it jointly and divide the expenses.

In brief:

Owner financing is generally a very effective and equitable method of closing land transactions. It makes it possible to close land deals swiftly, fairly, and in each party’s best interests.

Never forget that the seller has the option to accept, reject, or respond with a counteroffer to any offer you make.

Owners usually won’t accept a loan for longer than five years since they want their money. Therefore, you won’t be able to stretch out the loan over 30 years, but it will allow you more freedom than having to fund the deal upfront.

To be fair, a lot of buyers also want to pay off the loan quickly to take complete ownership of the property, transfer ownership of the land into their name, and avoid having the debt hanging over their heads.