Buying land takes a strategy different from purchasing a home. Land mortgages, bridge loans for building and rural financing programs are all available, but require good credit and fees paid to the lender. Another option is to buy with seller financing. When interest rates are high and the market is tight, more land becomes available with seller financing. Several types of contracts are available for those interested in buying land with seller financing.
Get proof from the county assessor’s office that the seller owns the land you’re interested in, and have a title search performed for liens against the property. Research land sales in the area by speaking with local firms specializing in land purchases and sales. Determine the land’s zoning through the local planning and zoning office.
Negotiate with the owner to arrive at a price and the terms of the loan. Expect to pay a down payment. Speak with an attorney to draw up a mortgage or deed of trust, giving you the rights to the land as long as you make the payments. Negotiate mineral and water rights, and if logging is your intention, your right to cut timber. Create a portfolio of information on yourself, outlining your credit worthiness and plans for the property. If you have bad credit, state this up front so no surprises occur.
Be prepared to pay an interest rate that is higher than that of a house mortgage at the time of your purchase, and for a shorter period of time. Negotiate a discount in the price if you pay off the mortgage ahead of the agreed upon term. Give the seller the right to repossess the land if you miss payments and declare in writing the conditions under which foreclosure can take place.
Obtain what is known as "clear title" to the property from the seller, allowing you to sell it to a third party as long as you are current in your payments, or to refinance the land with better loan terms once you have a good track record of mortgage payments.
Sign a "land contract" with the seller if clear title isn't possible, with the seller holding title to the property while you make principal, interest, taxes and insurance payments and perform upkeep on the land until the mortgage is satisfied. Expect to hold title under the term “equitable title,” allowing you the right to the land for your personal use, but not granting you the right to refinance or resell.
Expect to be foreclosed upon by the seller if payments are missed, with the seller keeping the down payment and monies paid against the mortgage. Pay less for closing a deal on seller-financed land as there will be no closing costs from a lender.
- Landthink: How to Sell Land: A Buyer’s Market Begs for Seller Financing
- University of Vermont Extension: Owner-Financed Sales and Land Contracts
- Land-Professor: Owner Financing: The Best Loan
- U.S. Department of Agriculture. "Farm Loan Programs." Accessed May 11, 2020.
- Consumer Financial Protection Bureau (CFPB). "What Is a Home Equity Loan?" Accessed May 11, 2020.
Jann Seal is published in magazines throughout the country and is noted for her design and decor articles and celebrity *in-home* interviews. An English degree from the University of Maryland and extensive travels and relocations to other countries have added to her decorating insight.