Benefits of Owner Financing for Your Land Purchase

    by Geoff Hurdle
    Hurdle Land & Realty, Inc.

    Buying land is a substantial investment, and many first-time buyers aren’t aware of all their financing choices or may feel intimidated by the process. There are a variety of options when it comes to financing property, but the traditional forms may not always be viable. Have you heard of owner financing? Are you aware of the benefits? Read on to learn why owner financing your land purchase may be your best option!

    What is Owner Financing?

    Owner financing (also called seller financing, seller terms or bond for title) is just what it sounds like; it’s a form of purchasing that allows the buyer to get financing from the seller rather than a bank. The property owner replaces the bank and payments will be sent directly to the owner, unless the owner chooses to sell your loan, in which case you will send payments to the investor(s) who purchased the loan.

    Owner financing land is not uncommon, in fact, many sellers are willing to finance a buyer’s purchase. It’s also quite challenging to secure bank loans for vacant land deals, people looking to move off the grid, or even families interested in diversifying their portfolios. If you’re not seeking a well-established and costly chunk of land (like a ranching operation or serious acreage), then banks likely won’t give you the time of day.

    Luckily, owner financing is on the table, and there are some great benefits for you!

    The Benefits of Owner Financing Your Land Purchase 

    1. Flexibility in Securing a Transaction: Traditionally, lenders have rigid requirements that won’t budge, but with owner financing, both parties can leave the deal happy. Different characteristics like down payments, payment amounts, length of the loan, interest rates, and more are open for discussion.
    2. Quick Closing Process: When you’re in direct communication with the seller for all parts of the purchase you’ll see that the closing process is much quicker, by cutting out all of the middlemen you and the seller can finalize the process on your terms.
    3. Save Money: When you seek lending through an institution there will be fees upon fees and hidden costs that could run into the thousands. When you opt for owner financing you won’t have high bank fees, loan arrangement fees or closing fees to worry about.
    4. Good for Buyers with Marginal Credit: Often times owner financing doesn’t always require a credit check, but some may. Although due to the more open nature of this financing option you may be able to work something out with the seller.

    Although different in many ways from traditional loans, owner financing still has some structure. A promissory note will be created by the buyer and seller that details the repayment schedule, interest rate, and the consequences of defaulting on the loan.

    This alternative financing method is often viewed as a win-win for all parties involved, and it can ultimately get you onto the land you purchased more quickly. Are you interested in searching for available owner financing properties? Check out the latest on here!

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    Discussion — 2 Responses

    • Bob Hatcher August 4, 2019 on 7:51 am

      Geoff, owner financing is like greasing the skids. People can walk into a car dealership & leave with a financed $50,000 pickup which deteriorates in value from day one. However they will find it difficult to find a bank other than Farm Credit to finance the purchase of a $50,000 tract of land that will appreciate. What are your thoughts on the owner netting more/acre + his 3-6 times greater return on his money vs putting it in a bank. Credit makes the World function—even the banks lend borrowed money!
      Bob Hatcher

    • Geoff Hurdle August 6, 2019 on 5:23 am

      Bob, I do believe a seller is able to get a little more for a tract of land when offering financing to the buyer. Usually because the buyer, like you said, cannot find financing and is willing to pay a little more in order to get what they want. Unlike an automobile, they cannot just go to the next seller down the road for the same car. Each parcel of land is unique and if someone wants it, they will do what they need to (within reason) to obtain it. The power of the TVM does make financing a viable investment option and usually better than the bank. However, a mortgage does have an end date and eventually that asset earns its last dime! Money in the bank may not earn near the return, but it is, as they say, MONEY IN THE BANK!


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