Buying and Selling Land

How to ask if seller financing is available

December 8, 2019 by Tammy Tengs

A buyer texts me and says: “will the seller carry the loan?”  As a land broker, buyers ask me this all the time. It’s totally reasonable to ask about the availability of seller financing because there are very few conventional loans for vacant land.

The thing is, when a buyer asks the question in this simplistic way, I cannot give them an answer.  And, there’s no point in me contacting the seller, my client, with a simple “hey man, will you carry the loan?”  Because I already know what the answer will be.  The answer from the seller will be “no”.  Or, if it’s not a flat out “no”, it will be a bunch of questions:

  • How much will the buyer put down?
  • What interest rate?
  • How many years?
  • What price?
  • What are the monthly payments?
  • Who’s paying the closing costs?

Then, since the buyer has not stated the terms they are proposing, what happens is a lot of back and forth between buyer, agent and seller. It’s a big ‘ole unnecessary time-sink for all involved.

So, my friends and valued buyers, I offer you my advice on the best way to approach a listing agent to ask if the seller will carry the loan.  I will show you how to save time and get positive results. 

Let’s get started. 

Sample Ideal Email Inquiry From a Buyer

Below is an example of an email that you might send to the listing agent.

“Hi Some Broker,

I’m interested in that parcel APN 987-654-321 at 1234 Some Street in Some City in Some County. I was wondering if the seller would consider carrying the loan with the following terms:

  • Price $80,000
  • Down payment $20,000
  • Principal $60,000
  • Interest rate 6%
  • Term 15 years
  • Monthly payments $506.31
  • No pre-payment penalty
  • Closing costs (escrow/title) shared 50-50
  • Closing in 21 days

Please let me know if the seller would consider these terms.  If yes, I am prepared to submit a written signed offer.

Thank you,

Some Buyer”

Notice the specificity?  Notice how the email includes everything that is needed and nothing that is not needed?  See how the inquiry clearly spells out the terms including the price, down payment, interest rate, length of the loan, and monthly payment?  Do that.  Please.

How to Calculate Monthly Payments

It’s easy to calculate the monthly payment so that you can include it in your email.  However, it’s not as simple as just dividing the amount owed by the number of months that you plan to make payments.  That only works if your interest rate is 0. 

To get the monthly payment for a fully amortized loan, use an online calculator: 

http://www.moneychimp.com/calculator/mortgage_calculator.htm

http://bretwhissel.net/amortization/amortize.html

What Terms Should You Offer?

Buyers, in order to draft the email above, you will need to decide up front, before even asking the Realtor if seller-financing is available, what terms you are proposing.  This will require a little advance thought on your part.  So, spend a few minutes running some numbers.  It will be worth it when you get a positive reply.  Below are some customary seller-financing terms to help you out.

  • Down payments typically range from 20% to 50%.  Please do not offer less than 20% for reasons spelled out here.
  • Interest rates on seller-financed land generally range from 4% to 10%.  I recommend that you not offer less than 6%.
  • Terms (length of the loan) typically ranges from 2-10 years. 

Out of all these items (down payment, interest rate, and term) the thing that sellers care most about is the down payment.  To increase your odds of success, make the down payment as large as you can.

How Not to Ask a Realtor if the Seller Will Carry

For comparison, let’s look at how not to ask a Realtor if the owner will offer seller-financing.

Buyer:  Yo, will the seller carry the loan on that parcel?

Agent: Which parcel?

Buyer:  The one on the internet

Agent:  Which parcel on the Internet?  What street, city, county, state please?

Buyer:  The land listing

Agent:  I have 50+ land listings. 

Buyer:  The one priced at $100,000?

Agent:  There are two, the one in California or the one in Oregon?

Buyer:  California

Agent:  OK, that’s the one in Riverside.  I will be pleased to ask the seller if they will carry the loan.  In order to ask the seller, I need to know the price, down payment, interest rate and term that you are proposing.  Then I can ask the seller.

Buyer:  Can’t you just ask the seller if he will carry, like, in general?

Agent:  Sorry, no, because if I do the seller will ask me to specify the terms before he decides.  What terms are you proposing please?  I need your proposed price, down payment, interest rate and the length of the loan.

Buyer:  I can put 25% down

Agent:  OK what price, interest rate and term?

Buyer:  6% interest

Agent:  Are you offering $100,000?  How long would you like the term to be?

Buyer:  No, I only want to pay $80,000.

Agent:  OK what term? 

Buyer:  10 years

Agent:  Payments would be $666.12 per month.  I will ask the seller and let you know when he replies.

Buyer:  No, I can only afford about $500 per month

Agent: OK then let’s change the term to 15 years.  I will ask the seller if he will consider $80,000 with $20,000 down at 6% interest for 15 years, payments to be $506.31 per month.  I will let you know when he replies.

Buyer:  OK thanks

Buyers, you don’t want to spend a bunch of time going back and forth on the phone, text or email just to get an answer to your question, do you?  I mean, the email/text exchange above took like half an hour.  You don’t want to invest that same half hour with five different Realtors on the five different parcels you’re interested in, right?  It would be much easier for you to spend a little time thinking about it before even contacting the agent and just send the agent the email I recommended above.  You could even use it as a template and send it to multiple agents on several parcels, editing key items slightly for each one.  Save yourself a bunch of time!

Who Should Name Their Terms First:  Buyer or Seller?

I find that Buyers usually want sellers to name their terms up front and sellers want buyers to name their terms up front.  So, who goes first?

I recommend that the buyer “go first”.  Here’s why:  As a listing agent who represents the seller, it doesn’t make sense for me to even ask seller if they will carry the loan at the time of taking the listing.  Why?  Because if I ask the seller if they will carry at the time of signing the listing agreement, the seller’s answer is almost uniformly “no”.  So, there’s no point to even asking.  Almost all sellers prefer cash, and, at the time of listing, they are usually thinking their parcel is so special it will sell quickly and for a full cash price.  At the outset, sellers see no reason to carry the loan.  This means that if you’re the first buyer me to ask, “will the seller carry?” it’s likely that I won’t know the answer to your question. 

And I cannot just pose this question to the seller “in general” or “hypothetically”.  I find that sellers run into a mental block when they are asked whether, in theory, they might consider carrying the loan.  Most sellers have no clue whether they should ask for 20% down or 50% down, whether the interest rate should be 4% or 10%, whether it makes sense to carry for 2 years or 15 years.  I find that most sellers cannot wrap their mind around the question of whether they might carry in general for some hypothetical nameless faceless buyer.  Sellers can only think about financing when the precise terms are spelled out by an actual buyer.  It’s a psychological thing.

So, as an agent, instead of asking the seller at the time of taking the listing whether or not they will carry, I wait a month or two until I get the first inquiry about seller financing from a buyer.  Then I ask the buyer to name their terms.  Armed with those terms, I go to the seller and say hey there is real buyer proposing actual specific terms and I ask the seller if they will consider those exact terms. 

This strategy is more likely to get a positive response from the seller.  One reason is that a couple of months into the listing period, sellers are starting to see that their parcel has not flown off the market with a full price all cash offer.  By this time, sellers are beginning to think about new ways to get their land sold.  A second reason is that if I can specify exact terms to a seller, he can ruminate about it in a concrete way.  Is the 20% down proposed by the buyer sufficient, he will wonder, or would it be better to counter at 30% so that the buyer has more “skin in the game”?  Is he willing to carry for 10 years, as the buyer requests, or will he need the money in 5 years for his kid’s college education?  Is the 6% interest rate proposed by the buyer less or more than what he earns on his other investments?  What would it be like to get a regular check for $506.31 per month?  That might be nice, he will think. 

So, buyers, when you name your terms this gives the seller something concrete to focus his thinking on.  It works much better this way and he is more likely to say “yes”.  Trust this advice from the experienced land broker.

Consider Your Audience

As a buyer, it’s best if you can learn something about the seller and agent before preparing your detailed inquiry about seller-financing.  Is the seller younger or older?  Is the Realtor a residential broker or a land broker?

If the seller is older, you will want to propose a shorter term for the seller-financing.  While banks can entertain long loan terms like 15-30 years, because they exist in perpetuity, land sellers are not banks.  They are humans with finite lifespans.  Some sellers are older and naturally want to get paid off while they are alive.  So, consider the seller’s age when deciding what term to propose.  The older the seller, the shorter the term you should propose.

The reason to consider whether the listing agent is a residential broker or land broker is that residential brokers will be less familiar with seller financing.  Residential brokers sell mostly houses and condos and may have only one or two land listings.  Since conventional loans are plentiful for houses, Residential brokers may not be aware that there are few conventional loans available for vacant land.  A residential Realtor might wonder “why doesn’t the buyer just go to their bank?”  Residential brokers may even greet your seller-financing request with suspicion.  Some may not have a clue how to prepare a seller financing offer, calculate monthly payments, create an amortization schedule, etc. (By the way, these are just some of many reasons that land sellers should list with land brokers not residential brokers, but I digress….)  Buyers, if your audience is a residential Realtor, it is even more important to spell out your proposed terms in detail in your first inquiry as I have shown you above.  If you do this, you will look like a serious buyer.  In addition, you will be educating the residential broker so that they will see that preparing an offer like this would not be all that cumbersome (for them).  Then they may take your “seller financing?” question more seriously.

Also remember that your “audience” for this inquiry, the listing agent and the seller, are probably not mathematicians or loan brokers.  So keep it simple!  I recommend that the type of loan you propose be as basic as possible.  For clarity, make it fully amortized.  This is because loans that are amortized involve just a single monthly payment and when you’re done making those payments the whole principal will be paid off. It’s an easy concept for sellers to grasp. Try to avoid proposing a balloon payment and never ever propose multiple balloon payments such as “I’ll pay you $20,000 up front, then monthly payments, the another $30,000 in 1 year, then more monthly payments, then $40,000 in 3 years.”  OMG.  Do not ask for an interest-only loan because that involves a balloon payment at the end.  A final recommendation is to avoid proposing multiple options.  Never say “we could do it this way or we could do it that way”.  You might think it’s totally logical that the seller would prefer to have choices, that way the seller can get more what he wants and so is more likely to carry the loan.  Wrong.  It just confuses the negotiation.  Think about Trader Joes.  One of the reasons they are so successful selling tomato sauce and frozen burritos is that they offer one option not multiple options.  If you want the seller to say “yes”, just propose a single garden variety amortized loan with one set of terms.

Finally, buyer, keep in mind that most sellers prefer all cash.  So, your audience for your “seller financing?” question will be someone who really doesn’t want to carry the loan.  You will have to entice them.  So, don’t go in with an offer that is low price AND a small down payment AND a low interest rate AND a long term because that’s not going to work.  Give the seller something to hang his hat on.  Make him want to work with you.  You’re not the only buyer out there.  You are in competition with other buyers, actual or theoretical, past, present or future.  And while you cannot make your offer superior to other buyers in all ways (because you’re not offering cash), you can make it superior to all other buyers in one way – and that’s on price.  So, if you’re going to request terms, at least offer full price. 

Buyer Worries

Sometimes buyers worry that if they send a detailed inquiry like the one I am suggesting, the seller will get the mistaken impression that it is an actual offer.  They fret that if the seller says “yes” they will be “under contract”.  Not true.  In real estate, a contract has to have two signatures.  And when a buyer sends this kind of inquiry to a Realtor, and the Realtor forwards it to the seller, and the seller says, “sounds good”, nobody has signed anything.  The seller’s positive response just means “I invite you to submit a formal offer and, if you do, and I will look at it favorably”.  However, until there is a signed agreement, there is no deal and either party can walk.  So, buyers, don’t be afraid to state your terms up front with some specificity.

From the Perspective of the Realtor and Seller

In addition to increasing the odds of getting a positive response, something that benefits the buyer, the strategy that I am advocating also serves the purposes of the Realtor and seller.  Asking the buyer to give a few minutes of thought to the kind of seller-financing deal he wants, weeds out those buyers who are not serious about the parcel in question and are just sitting around in their jammies, watching Netflix, surfing Zillow, and blasting off “seller carry?” emails to random agents.  After all, not all “buyers” are buyers.  And there’s no point in getting a seller’s hopes up if the buyer is not really a buyer. I find that real buyers are willing to spend a few minutes crafting their seller financing proposal. It’s a good test.

Conclusion

If you’re interested in purchasing a piece of land, it’s reasonable to ask a Realtor whether or not their seller client will carry the loan on a parcel of land.  The best way to do it is to briefly specify all terms up front.  This will increase your odds of getting a positive response!

Filed Under: Agent, Buying, Financing, Negotiation, Rant, Seller financing

No, the seller will not accept $0 down

June 21, 2019 by Tammy Tengs

No Money Down

In lieu of requiring buyers to pay all cash, some land sellers choose to offer “owner financing”.  The seller accepts a down payment from a buyer of, say, 20% and then the buyer makes monthly payments to the seller over time.

When one of my seller-clients decides to do this, I ask them to specify up front the terms they will consider, i.e., the down payment, interest rate, and number of years.  An example is 20% down, 6% interest, 10 years.  I put the seller’s terms in black and white in all of my marketing materials.  Yet, inevitably, I find that whatever down payment the seller requires, a few buyers will always contact me and ask if the seller will accept a smaller down payment.

Typical conversation with a buyer

This video shows a typical conversation that I will have with buyers.  It explains why sellers offering “owner financing” will not accept a small down payment:

Additional reasons why sellers will not accept $0 down or a low down

The commission and closing costs are not the only reason sellers will not accept $0 down.  The seller might also have liens or back property taxes to pay.

For example, suppose the seller in our $100,000 video example still owes $4000 on a loan tied to the land.  In addition, he owes $3000 in a child support lien and $2000 in back property taxes.  In order to transfer the land to a buyer “free and clear”, escrow will require the seller to pay those items, along with the commission and closing costs, out of the seller’s proceeds.  Even though the seller is paying these items, and the buyer is not paying them, the down payment that the buyer gives the seller has to be sufficient to cover all of the items the seller is responsible for or the seller will have to write a check to escrow in order to close.  Land sellers do not want to write checks.  They want to receive checks.  Getting money in return is kind of the whole point of selling land when you think about it!

Further, when a seller offers to carry the loan, he will naturally have a keen interest in making sure that the buyer will make their monthly payments in full and on time.  The higher the down payment, the less likely the buyer will flake out in the future.  This is because buyers realize that they will lose their down payment (and the land too) if they don’t pay.

Other sellers have in mind a certain amount of money that they want up front for a particular and immediate use in their life.  Maybe they have medical bills to pay.  Maybe they’re trying to fund the family’s vacation to Hawaii.  Maybe they want to buy another parcel of land.  Maybe they want to renovate their kitchen.  Maybe they owe money to their drug dealer.  Who knows?  The point is, some land owners don’t want to sell their land at all unless they can get some threshold dollar amount down from a buyer.  If they can’t get at least that amount, they won’t sell at all.

Occasionally “the seller” is actually multiple sellers, each with a percent interest.  So, whatever the buyer puts down ends up getting split 2, 5, 8 ways (or whatever) after costs are deducted.  The amount each individual seller will end up with at closing is therefore small.  The more co-owners there are, the more the required down payment can get ratcheted up.

Advice to buyers

Before buying land, consider saving your money for a while so that you will have a sizeable down payment.  Or, find a co-investor.  Or purchase a less expensive parcel of land.

If you really want to purchase land with $0 down or a small down, don’t even look at parcels listed by Realtors.  This is because, when there is a Realtor involved, the seller will always have to pay the commission out of any down payment that you propose.  The math is not going to work out.  So, buyers, if you don’t want to put at least 20% down, look only at For Sale by Owner (FSBO) listings where the seller does not have the expense of a commission.

If you have your heart set on a parcel listed by a Realtor, then at least contact the Realtor and ask if the land is “free and clear” of all liens and back taxes.  Sometimes the agent will know the answer to this question and sometimes they won’t.  Depending on what the agent says, do a “back of the envelope” calculation.  Consider things from the perspective of the seller.  Add up all the costs you think the seller will have to pay at closing:  liens, back taxes, commission, and closing costs.  You won’t have the exact numbers, so just estimate.  When estimating, keep in mind that commissions are not always 6%.  They can be 8%, 10% or anything and the listing agent is unlikely to tell you what commission the seller is paying.  The total you come up with is your estimate of the bare minimum down payment the seller might possibly consider.  Throw in an additional cushion of several thousand dollars over that sum and that’s the down payment you might propose in your seller-financing offer.  If you find that the total exceeds what you want to put down, then don’t even bother submitting an offer.  Move on down the road and buy a different parcel.

Suppose that the seller’s total costs, including liens, back taxes, commission, and closing costs, add up to $9642.  Buyers, please don’t assume that you can offer the seller $9700 down and he will accept it.  The seller is not going to transfer title to you in return for a check for $58 dollars at closing.  The seller will want to receive a check for thousands of dollars at closing in order to agree to carry the loan for you.  That’s why it’s important to cushion the down payment offer by several thousand dollars over and above the seller’s total costs.

Also, note there are basically two ways the seller can carry the loan.  One is with a “trust deed” where title is transferred to the buyer at closing.  Escrow records a lien on the land in favor of the seller and the seller and becomes a non-owner and lender just like he is Wells Fargo.  The second way is a “land contract” where the seller retains title until the loan is fully paid off.  The land contract is sort of like buying a car.  After you make all the payments, then you get the pink slip.  You don’t get the pink slip (title) up front.  I’m not sure about other states, but the trust deed is the most common in California and Oregon, and I have never seen a “land contract” used in these states in my career.  However, a “land contract” is the only kind of agreement that is likely to work with $0 down or a low down.  This is because sellers are unlikely to want to transfer title to you up front when you are putting no money down.  As a buyer, you might try proposing a “land contract” to FSBO sellers instead of a “trust deed”.

Finally, buyers, remember that, in addition to the down payment, you will also be expected to pay your portion of closing costs. Closing costs include the escrow fee and title insurance.  These costs are entirely separate from the down payment and are paid to the escrow and title companies, not to the seller and not to the Realtor.  Even in the unlikely event that you can convince a seller to accept $0 down, you will still be expected to pay your share of these costs.  Purchasing real estate is not free.

Advice to sellers

Offering to “carry the loan” is one way to dramatically increase the odds of selling your land, and for top dollar.  The reason is, there are virtually no good bank loans for most kinds of vacant land.  Sellers who offer to “carry” do not think of it as a burden.  They think of it as an investment that yields a return secured by real estate.  Consider whether or not seller-financing is right for you.  If you don’t want to carry the loan, that’s totally fine, just know that your buyer-pool will likely be limited to those buyers who have all cash.  If you do decide to offer seller-financing as an option, consider requiring at least 20% down.

Conclusion

The notion of a zero-down payment on land is basically a myth. I have never seen a seller accept that in my career.  Purchasing land with a low (not $0) down payment might be possible but not when a Realtor is involved in a transaction.  Buyers who are seeking seller-financing, and want to consider parcels listed by Realtors, should be prepared to put down at least 20%.

Filed Under: Buying, Closing costs, Commission, Seller financing, Selling

How to find seller-financed land for sale

July 30, 2016 by Tammy Tengs

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.

Filed Under: Buying, Seller financing

Where do land buyers find the money?

July 25, 2016 by Tammy Tengs

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.

Filed Under: Buying, Financing, Loan, Seller financing

Tammy Tengs

Land Broker; systematic; empath; doctorate from Harvard; likes vegetarian food, documentaries, water aerobics, learning new technology, and all things real estate.

California license #01436288

Arizona license #BR688152000

Oregon license #201208568

Land22 Real Estate

http://land22.com

How to ask if seller financing is available

Find money to buy land

Where do land buyers find the money?

Pay closing costs

Isn’t the other guy supposed to pay those closing costs?

Seller Financing, Genius

How to find seller-financed land for sale

Principal Broker Misspelled

Dear principal brokers, it’s spelled “principal” not “principle”

Counteroffer on price

Why do sellers have to sign so many pages just to counteroffer on price?

Base price on competition

Why it may not be wise to base your listing price on what similar parcels are selling for

Counter over the asking price

Can the seller counter over the asking price?

Longitude Latitude of Parcel Corners

How to find the longitude and latitude of parcel corners

Google Maps

How accurate are longitude and latitude in Google Maps?

The imperfect relationship between selling prices and tax-assessed value for vacant land

The imperfect relationship between selling prices and tax-assessed value for vacant land

Dear Neighbor

Selling land? Write to the neighbors!

Woman Asking For Directions

How to write good driving directions

Cost-effective improvements you can make to sell your land faster and for more money

Reading the “days on market” tea leaves

10 reasons land sellers sometimes have so little knowledge about what they’re selling

Has your property been affected by recent wildfires? Check out this interactive map!

Effect of wildfire on land prices

How to tell if a parcel is landlocked

City or County?

Where to go to learn about building restrictions

Due diligence when purchasing vacant land: buyer’s frequently asked questions

Categories

  • Agent
  • Buying
  • Closing costs
  • Commission
  • Days on market
  • Driving Directions
  • Due diligence
  • Easements
  • Financing
    • Loan
    • Seller financing
  • Fire
  • Improvements
  • Maps
  • Marketing
  • Negotiation
  • Neighbors
  • Pricing
  • Purchase agreement
  • Rant
  • Selling
  • Taxes
  • Email
  • LinkedIn
  • YouTube

Copyright © 2021 · eleven40 Pro Theme on Genesis Framework · WordPress · Log in