Buying and Selling Land

How to find seller-financed land for sale

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Seller Financing, Genius

With bank loans difficult to secure for vacant land, buyers basically have two options:  1) pay cash or, 2) seek seller financing. In fact, vacant land sellers financed approximately 17% of California land purchases last year in the $50,000-200,000 price range.

So where can the savvy buyer go to find land for sale where the seller is willing to finance the deal?

Craigslist

Craigslist is a good place to find seller financed properties.  This is in part because there are many For Sale By Owner (FSBO) listings. First choose the geographic area you’re interested in on Craigslist and then head on over to the HOUSING > REAL ESTATE FOR SALE section.  Although a misnomer, the HOUSING section is the place to find all real estate, including vacant land.

To search for seller-financed properties, enter terms like the following into the search field:

  • “seller financing”
  • “owner financing”
  • “carry” (picks up phrases like “seller will carry the loan”)
  • “OWC” (abbreviation for Owner Will Carry)
  • “OMC”  (abbreviation for Owner May Carry)
  • “contract” (identifies sellers who say they are offering a “land contract”)
  • “bank” (picks up phrases like “no bank needed”)
  • “finance” or “seller” (picks up phrases like “seller will finance”).
  • “financing” (picks up phrases like “seller is offering financing”)
  • “terms” (picks up phrases like “seller will consider terms”)
  • “motivated” or “submit” (identifies properties where the seller is “motivated” to sell, or where seller is inviting buyers to “submit” any offer)

Here is an example on how to search for land on Craigslist using the search term “carry”:

Try experimenting to find the search phrases that work best in your geographic area. For example, in a rural area a search on “carry”, intended to capture listings that say “carry the loan”, may also pick up unwanted listings that mention the “carrying” capacity of wells, or the number livestock the acreage will “carry”.  On the other hand, this might never happen in an urban area where there are no livestock and few wells.

Also be aware that searching on a word like “carry” might capture listings that contain phrases you certainly don’t want such as “seller will NOT carry”.  Consider also that a search on something like “financing” will not pick up postings that say, “seller will finance” (because “financing” and “finance” are not the same word).  However, a search on “seller” will pick up both “seller financing” and “seller will finance”.

Get creative with your search and see which terms and phrases works best in your area. Whatever you do you will still have to sift through a collection of ads to find those gems.

As one example, a search the search for “carry” on vacant land in Sacramento California yielded 29 results.

Zillow

The national website Zillow is another place to find seller financed land.

To find owner financed properties, enter terms and phrase like those mentioned above, e.g., carry, OWC, into the Keywords search field.  This will identify only those parcels that have these terms/phrases in the paragraph remarks of the Zillow listing.

Below is an example on how you might search for land in Los Angeles County California if you were seeking property paragraphs that contain the keyword “financing”:

Beware, however, that this search strategy will fail to identify certain parcels.  It will not identify parcels where the seller is in fact offering financing but the listing agent, when originally entering the listing into the MLS, entered that detail in the special financing or terms field of the MLS, but did not enter that information in the paragraph field in the MLS.  Financing database fields are not syndicated from the MLS to Zillow so you cannot search them in Zillow.  (See the section below on how to search them directly in the MLS.)

The above search of Zillow on Los Angeles County in California yielded 60 potentially owner-financed parcels for sale.

The MLS

For a comprehensive search of all owner-financed land listings represented by Realtors in a certain geographic area, ask a real estate agent to search the MLS for you.

Start by considering location.  There are many MLS systems, each specific to a different geographic location.  Most Realtors belong to one local MLS so be sure to find an agent with access to the particular MLS that that has the most comprehensive coverage in the geographic location that interests you. For example, if you’re interested in San Diego County land do not ask a San Francisco area agent to help you.  Ask an agent who specializes inSan Diego County.  The Realtor can search for owner-financed land meeting all of your criteria.

Below I describe search strategies for three popular MLS systems in California and Oregon, the CRMLS, Metrolist, and the RMLS.  I won’t link to them because only a Realtor can search these fields in the MLS.  However, it might help you to understand the MLS fields related to seller financing so that you can discuss MLS search strategies with your Realtor.

CRMLS

In the California Regional MLS (CRMLS) in southern California a Realtor could search the field named “terms” using the strategy:  TERMS=Owner May Carry OR Owner Will Carry.  The difference between “may carry” and “will carry” is probably obvious – “may” means that the seller is not fully committed to offering financing and has a preference for cash.  Whether such a seller will carry the loan or not depends on the details of your offer.  “Will” means that the seller is likely to carry with acceptable terms and may even prefer to carry the loan compared to receiving cash.

To expand your search and find even more properties try: TERMS=Owner May Carry OR Owner Will Carry OR Submit.  “Submit” is ambiguous and can mean any number of things.  It sometimes means that the listing agent has not discussed the possibility of carrying with the seller but the listing agent thinks that there is a chance that the seller may carry, e.g., because the seller is an investor and there is no mortgage on the land.  Listings that say only “submit” may or may not be worth your time to investigate depending on how motivated you are to identify such properties or enlarge the pool of your prospects.

When searching for vacant land in the CRMLS, the Realtor will use the Land/Lot detail search form. Although detailed, the “terms” field does not appear on this form. Down at the bottom of the form the Realtor can add the field. After the Realtor has added the field, she can search it.

For example, a search of CRMLS on Riverside County in California yielded 796 owner-financed parcels of land for sale.  Wow, that’s a big number!

MetroList

In the Sacramento-area MLS, MetroList, the database field called “terms” can be searched to identify properties where the seller will carry the loan.

This field can be found under Additional Criteria. Search on TERMS=Owner Financing. Or to enlarge the pool search on: TERMS=Owner Financing OR Creative.

As one example, a search of MetroList on Placer County in California yielded 81 owner-financed parcels for sale.

RMLS

The largest MLS in Oregon is the RMLS. To find properties where the seller may carry the loan, use the field “Terms”.

Using the Advanced MLS Search, add the field “Terms” to the search page. From the Terms menu, choose both “OWC2nd” which stands for “Owner will carry a second” and “OWNCONT” which stands for “Owner will carry a contract”.

RMLS search for seller financing

For example, a search of the RMLS in Lane County Oregon yielded 140 owner-financed parcels for sale.

LandsofAmerica

Land-specific websites such as LandsofAmerica do not contain all land listings syndicated from the MLS.  On the other hand, they have many listings that are not in the MLS, e.g., For Sale By Owner.

To search, scroll down to Additional Filters and check the “Owner Financing” box.

For example, a search of LandsofAmerica on Siskiyou County California yielded 5 owner-financed parcels for sale.

LandAndFarm

On LandandFarm you can select the box “Seller financing” to limit your search.

A search of LandAndFarm on Fresno County California, for example, yielded 19 owner-financed parcels for sale.

Land Investor Websites

Many investors purchase land at tax sales at low prices and then re-sell the parcels at somewhat higher prices.  One example is DesertLand:

For example, DesertLand has 10 parcels available in the greater Joshua Tree California area, all with seller financing.

To find other land investor websites, try searching Google on “real estate” “land” “owner financing” “<your state>”.

Realtor Websites

Some Realtors indicate on their website when seller financing is offered on their own listings.  For example, at Land22 Real Estate we have special pages on our California and Oregon websites devoted to all seller-financed properties that we have for sale:

For example, at this time Land22 has 7 parcels in California and one in Oregon where the sellers are offering financing.

Conclusion

Bank financing for vacant land is scarce and many buyers do not have all cash. Even buyers who do have all cash may wish to finance a portion of their land purchase. Buyers seeking seller financing can investigate these sources to locate land offered by owners who may be willing to carry the loan.

Where do land buyers find the money?

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Find money to buy landWhen buying a house, most people finance the purchase their home purchase with a bank mortgage. However, when it comes to purchasing vacant land, where do land buyers find the money?

Their choices are:

  • Cash
  • Loan
  • Seller financing

Which source of funds is more prevalent? How does the source of funds vary by price range? I’ve always wondered.  So I did some research.  Now I can share my research with you.

First, let me explain what I mean by each source of funds.

Cash

I thought that “cash” was self-explanatory until the time I told a buyer that the seller required “all cash” and he replied “so, you want me to come to your office with dollar bills in a duffle bag and put it on your desk”? From the perplexed look on his face I understood in that instant that “cash” means different things to different people!

Paying for land with “cash” means that you pay with money you already have in the bank or some other account. The money is sitting there, ready to go toward your land purchase. It is “liquid”.   You can write a check or wire the funds to escrow tomorrow.

Loans

Loans to purchase houses and condos are plentiful. But remember, you’re buying land, dirt, not a home with four walls. Loans to purchase land are scarce.

When available, a loan to purchase land might be available from a bank, credit union or other conventional lender. Loans are sometimes financed by so called “hard money” lenders. Occasionally sellers receive loans from family, friends, or acquaintances.

Seller Financing

Seller financing is also a type of loan. The only difference is that instead of the bank serving as the lender, the seller becomes the lender.

It works like this: The buyer makes a down payment. The seller transfers title to the buyer at closing and the seller becomes the lender. The seller has a lien on the property, just like a bank. The buyer makes payments to the seller (now the previous owner) over time. When the buyer finishes paying off the loan the seller removes the lien. If the buyer does not pay, the seller contacts the Trustee and forecloses, just like a bank would.

How Common is Each Source of Funding?

To figure out where buyers were getting their money to buy land, I searched one large Multiple Listing Service (MLS), the California Regional Multiple Listing Service (CRMLS). I identified all vacant land parcels sold in the last year in various price ranges.

In the one-year period that I reviewed, a total of 4786 parcels of vacant land sold. Of those, 3398, or 71% were purchased with cash. Further, 910, or 19%, were purchased with a bank loan or other loan of some kind. The remaining 478, or 10%, were purchased with seller financing.

Land purchase funding source, all price ranges
Land purchase funding source, all price ranges

 

Variation in Funding Source by Price Range

The source of funding varies by price range. For land selling in the $50,000-$199,000 price range, seller financing is more common than outside loans.  Seller financing is used in approximately 17% of transactions.  This is clear in the figure below:

Land purchase funding source, $50,000-199,000 price range
Land purchase funding source, $50,000-199,999 price range

 

For land selling in the $200,000-$1M price range, outside loans are more common than seller financing and are used in 23% of sales:

Land purchase funding source, $200,000-999,000 price range
Land purchase funding source, $200,000-999,999 price range

 

Cash is the most common way buyers purchase land in all price ranges except the $1M+ range. In that high price range, buyers are slightly more likely (51%) to purchase land with a loan than pay cash (46%). Seller financing in the $1M price range is rare (2%).

Land purchase funding source, $1M+ price range
Land purchase funding source, $1M+ price range

 

Here is the complete data for all price ranges:

Price Range               N                      Cash Seller Financing                   Loan
$0-49,999  2127  76%  7%  17%
$50,000-99,999  724  76%  16% 8%
 $100,000-199,999  638  68%  18%  14%
 $200,000-499,999  635  69%  10%  21%
 $500,000-999,999  305  64%  9%  27%
 $1M+  357  47%  2%  51%
All 4786 71% 10% 19%

Conclusion

In California in 2016, mortgages are plentiful for homes, but not for land. Land is generally purchased with cash. Seller financing is common, especially in some price ranges.