How to buy land with (almost) no money

So, you dream of owning land.

Maybe you want to build a tiny house, a storage container home, or a yurt. Or you dream of having a garden, a few chickens, and a barn for your horse. Perhaps you envision a unique modern home with lots of glass and a panoramic view. Or you’re thinking of a large, rambling house where you will sit on the big covered porch and watch your children play. Maybe you just want a place to go. Get away. Hang out in your RV. Chill.

But you’re short on cash.

You discover that your bank will gladly give you a mortgage on a house or condo. But they won’t give you a loan on vacant land.

The good news is that you can still be a landowner. But how?

The seller of the land may offer financing!

Last year in California, for example, sellers financed 17% of land purchases in the $50,000-$200,000 price range.

What is seller financing?

Well, it’s pretty simple: A landowner sells his property to a buyer and then acts as the lender. The buyer makes payments to the seller over time.

There are two kinds of seller financing: 1) note and deed of trust and 2) installment land sale contract. The main difference is the timing of the transfer of title from seller to buyer.

With a trust deed, the seller gives title to the buyer upfront. The seller then has a lien recorded on the property. If the buyer fails to pay, the seller forecloses and takes the land back. This is the same way a bank mortgage on a house works. The seller is essentially the bank.

With a land contract, the seller retains the title until the buyer makes all payments. Upon receiving the final payment, the seller gives the buyer title. This is the way a car loan works.

About 99% of the time, California land sellers use a note and deed of trust for owner-financed sales. A land contract may be more common in other parts of the US.

Who prepares the paperwork?

In California, Realtors complete a special Seller Financing Addendum that spells out the terms. The buyer and seller sign it. Then, the escrow officer uses that addendum to prepare additional legal paperwork. At closing, the escrow officer also records the lien.

What if your credit is not so great?

Don’t have perfect credit? I’ve got good news for you. About 80% of the time, the seller does not request an income or credit check. Weird, right? I don’t know why this is the custom in California, but it is. Maybe it’s because sellers are motivated to sell and consider seller financing as a kind of investment secured by the land. They want the interest, and sometimes they can get a better price if they carry the loan. They realize that if the buyer doesn’t pay, they can always foreclose, keep the deposit and all payments made to date, get the land back, and re-sell it, possibly at a higher price in a better economy. Likely, they wouldn’t have to go through the hassle of eviction because there is no house on the land. Occasionally, I even encounter a Machiavellian seller who almost hopes the buyer will not pay. Don’t shoot the messenger. I’m just telling you like it is.

OK then! So, how can you find a seller who is willing to finance the deal? Read on.

Craigslist.org

Craigslist is an excellent place to find land with seller financing. This is because there are many For Sale by Owner (FSBO) listings.

First, choose a geographic area. Then go to the “Housing > Real Estate for Sale” section. Although a misnomer, the Housing section is the place to find vacant land. Choose Housing Type = Land.

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

seller financing, seller-financing, seller finance, seller-finance
owner financing, owner-financing, owner finance, owner-finance
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 “contract” or a “land contract”)
bank (picks up phrases like “no bank needed”)
finance (picks up phrases like “I will finance”)
financing (picks up phrases like “may offer financing”)
loan (picks up phrases like “owner may offer a loan”)
seller (picks up phrases like “seller is anxious to move out of the state”)
terms (picks up phrases like “seller will consider terms”)
motivated (picks up phrases like “motivated to sell”)
submit (picks up phrases where the owner is inviting buyers to “submit any offer”)
note (picks up phrases like “will consider a note”)
down (picks up phrases like “will accept payments with a down payment”)
paper (picks up phrases like “seller will carry paper”)

For example, here’s how to search Craigslist for California land in the Inland Valley area using the term “carry”:

One downside of this search method is all the false positives. Unfortunately, searching for a word like “carry” will capture listings that contain phrases you don’t want, such as “seller will not carry.”

Note also that the best search phrases vary by part of the country. You’ll want to experiment to see what works best in your area. For example, in rural areas, a search on the word “carry” may capture unwanted listings that mention the “carry” capacity of wells or the number of livestock the acreage will “carry.” These false positives will not happen in an urban area with no livestock and few wells.

Whatever you do, you will still have to sift through a collection of ads that pop up to find those gems. No search will be perfect.

For example, I searched Craigslist for vacant land in Sacramento, California, using the word “carry.” It yielded 20 good results, including these:

“I may also be able to do a finance option and carry the balance if you put enough down”
“Seller Will Carry with Large Down”
“Willing to do an option on the land as owner-financing to carry the majority of the cost for you”
“Will carry with 50% down”
“Possible carry paper with large $”
“Owner will carry a note with a large down payment”
“Possible owner carry option available”
“Get the directions and parcel maps to all the owner carry properties with low down payment at …”

My search also captured two unhelpful results:

“No owner carry option”
“I can not carry any loan”

There are 115 land parcels for sale in Sacramento currently advertised on Craigslist. So statistically, at least 17% offer seller financing.

Pro tip: If you want to get sophisticated and string multiple search terms together or omit listings that contain specific terms, you can learn more about Craigslist search here or here. If you decide to go this route and create a complicated search string, save it somewhere so you don’t have to re-create it next time.

Multiple Listing Service (MLS)

For a comprehensive search of all owner-financed land listings represented by real estate agents, ask a Realtor to search the MLS.

Before choosing a Realtor, consider where you want to buy land. There are many MLS systems, each specific to a different geographic area. So be sure to find an agent with access to the MLS with the most comprehensive coverage in the geographic location that interests you. For example, do not ask a Los Angeles agent to help you if you’re interested in San Francisco area land.

Below, I describe search strategies for two of the largest MLS systems in California: CRMLS and MetroList. Although only a Realtor can search the full MLS, it might help you, the buyer, to understand the MLS data fields related to seller financing. This way, you can discuss search strategies with your Realtor.

Not in California? No worries. The MLS systems in your state will be similar.

Pro tip: If you ask a Realtor to search the MLS for you, be sure to also specify other requirements that you might have. Don’t ask for a list of every single seller-financed property in the MLS. For example, do you have a price range? Need access to water? Want to eliminate properties that are landlocked with no road access? Ask your Realtor to narrow it down for you.

California Regional Multiple Listing Service (CRMLS)

The California Regional MLS (CRMLS) covers southern California and parts of northern California. Search the field “Listing Terms” using this strategy:

Listing Terms=Owner May Carry OR Owner Will Carry

“Owner Will Carry” means that the seller will likely agree to carry the loan with acceptable terms. The seller may even prefer to act as the lender over receiving all cash. This is because he wants the interest payments. “Owner May Carry” means that the seller is not fully committed to offering financing and prefers cash. Whether the seller will carry the loan depends on the details of your offer, how clearly and enthusiastically his agent explains it to him, and what kind of mood the seller is in that day.

To expand your search, try:

Listing Terms=Owner May Carry

OR Owner Will Carry

OR Contract

OR Lease Option

OR Private Financing Available

OR Submit

“Contract” sounds like a generic word, but it is short for “land contract,” the type of financing that works like a car loan. Even though you, the buyer, may prefer a trust deed over a land contract, consider including “contract” in your search. This is because few Realtors appreciate the difference between a trust deed and a contract, and the seller’s agent may have chosen “contract” to indicate that some form of owner financing may be available.

If you want to buy land, not lease land, then a “lease option” is not what you are looking for. However, as with “contracts,” some agents may not appreciate the difference between a lease option and seller financing since both involve making payments over time. The listing agent might have chosen this option during data entry to indicate that owner financing is available. So search on it to see what you find.

“Private financing available” indicates that a loan may be available from an individual or company that isn’t a bank or traditional mortgage lender. For example, the seller may be affiliated with a hard money lender or a wealthy family member who likes to lend money. Listing agents also sometimes mistakenly choose this option at the time of data entry to indicate that the seller will carry the loan.

“Submit” is an ambiguous term and can mean many things. Sometimes, listing agents choose this to say their client is motivated to sell. The agent is encouraging other agents to “submit any offer!” Other times, it means that the listing agent has not discussed seller financing with the owner but thinks that there is a chance that he may be willing to carry. The agent could be encouraging you to submit an offer and find out.

A search of CRMLS for land in Los Angeles, California, on Listing Terms=Owner May Carry OR Owner Will Carry yielded 355 owner-financed parcels of land for sale. There are 3102 land parcels for sale in Los Angeles County today. That means that 11% of land sellers offer seller financing.

Sometimes, the seller will carry, but the agent leaves the “listing terms” field empty. Instead, the agent enters phrases into one of these text fields:

Description
Private remarks
Publication remarks
Syndication remarks

Weirdly, it is impossible to search the above text fields in the CRMLS. But there is a workaround: Your agent can export the data into a spreadsheet and then search.

For the Los Angeles data, I searched the four text fields in Excel for the word “carry.” I found 366 instances where the “listing terms” menu field was blank, yet the seller was willing to carry the loan as explained in a text field. Here are three examples:

“Owner may carry half with only 2% friendly interest”
“Seller is open to carrying back financing for an attractive offer”
“Seller willing to carry”

Pro tip: In the CRMLS, do not search the field “buyer financing.” That field is for properties that have already sold.

MetroList MLS

The MetroList MLS covers portions of northern California. Your Realtor can search the “Terms” field to identify properties where the seller will carry the loan. This field is under “Additional Criteria”. Search on:

Terms=Owner May Carry

To expand the search, try:

Terms=Owner May Carry

OR Owner May Carry 2nd

OR Owner May Carry 3rd

OR Creative

OR Lease Option

OR Private Financing Available

A search on Terms=Owner May Carry in Placer County, California, yielded 35 owner-financed parcels of land for sale.

Zillow.com

The national website Zillow is another place to find seller-financed land. The great thing about Zillow is that you don’t need a Realtor to search it. The disadvantage is that it lacks important data found only in the MLS.

Zillow has two sections, “By agent” and “By owner and other.” You must review each separately. The listings in the “By agent” section come from the MLS. The “By owner and other” section contains listings from sellers not represented by an agent.

MLS systems have rules about what data fields they will syndicate (transfer) to sites like Zillow. Unfortunately, the “seller financing” field is not syndicated. This means that even in the “By agent” section, you cannot search Zillow by simply choosing owner-financing from a menu. So you will have to get creative.

Enter terms and phrases into Zillow’s “Keywords” search field.

For example, enter “carry” or “seller financing.” This will identify parcels where these terms appear in Zillow’s “What’s special” paragraph. This field is identical to the MLS description field.

This search strategy will not identify properties where the seller is, in fact, offering financing, but the listing agent entered that detail in the special financing or terms field of the MLS without mentioning it in the property description field.

My search of the “By agent” section of Zillow in San Diego County on the keyword “carry” yielded 18 owner-financed parcels for sale.

Pro tip: You can also try searching Redfin.com or Realtor.com in the “Keyword search” field. The data from all three public-facing sites is syndicated from MLS systems. Results will be similar, so you only need to search one, not all three.

LandFlip.com

Sites like LandFlip.com have many listings not represented by Realtors, so they are not in the MLS. Private land investors are selling these parcels.

Search on city, county, or state. Then, to the right of the search bar, click on the filter icon. Choose “Owner Finance” and click the green search button:

A search of LandFlip.com for all California parcels with owner financing yielded 292 listings.

Land.com

Land.com is like LandFlip.com in that investors, not real estate agents, offer most properties.

Search on city, county, or state. Then, in the Misc. section, check the “Owner Financing” box and click “Apply Filters”.

For example, my search of land.com for all active vacant land listings in California with owner financing yielded 745 properties.

Land Investor Websites

Land investors purchase property at low prices and then re-sell at higher prices. Sometimes, they advertise these parcels on their website. One example is DesertLand:

DesertLand offers financing on all listings. Currently, they have 7 parcels available in the greater Joshua Tree, California area, all with seller financing.

Another investor site is Landio. They have 15 parcels available with seller financing all over the US.

I have no affiliation with DesertLand or Landio and do not know the owners. I offer them only as examples of the many land investor sites like this nationwide. To find investor websites in your area, cut and paste one of these strings into Google, substituting in your state:

“real estate” land “owner financing” <your state>

“real estate” land “seller financing” <your state>

Realtor Websites

Unlike houses and condos, vacant land is commonly sold with seller financing. So, Realtors who sell land, not houses, may state on their website when the seller offers owner-financing. For example, at my company, Land22 Real Estate, we have several parcels with seller financing.

For example, here are the terms on this corner lot south of San Jose: “Cash or seller may carry the loan with $12,000 down at 6% interest for 5 years. Payments would be $927.97 per month.”

And here are the terms on this 120-acre parcel in the southern California desert: “Cash or seller may carry the loan with $20,000 down at 4% interest for 3 years.”

Just Ask

What if you fall in love with a property, and there is no sign the seller may carry the loan?

You should still ask!

If the property is vacant land and not a house or condo, you’ll get a “yes” or “it depends” maybe 10–20% of the time.

But only if you ask in the right way.

Please do not contact the listing agent with “Yo, will the seller carry?” The Realtor can’t answer that question unless you specify the price and terms. For example, are you offering half the asking price, 5% down, 3% interest, and want a 30-year term (when the seller’s age is 80)? Then the answer is “no”. Or are you offering the full price, 30% down, 10% interest, and want a 2-year term? Then the answer might be “yes”.

As you can see, it depends.

Here is an example of the kind of email inquiry that will increase the chance of a positive response:

To calculate the monthly payment, use any online mortgage calculator. This one is simple to use with no distracting bells and whistles.

There are many ways to structure a loan, e.g., interest-only, balloon payments, etc. But don’t be creative in this initial inquiry. Just propose a simple, fully amortized loan: Down payment, interest rate, term, and monthly payments. That’s it. Your goal is for the seller’s agent to understand what you are asking so that you can get a “yes” from the seller. Keep it simple.

If a seller is willing to carry the loan, why isn’t it advertised that way? The answer to that question has to do with seller psychology. Most land sellers suffer from “Lake Wobegon” syndrome (where all the women are strong, all the men are good-looking, and all the children are above average). Sellers think their land is far better than other parcels and likely underpriced. When listing their land for sale, they expect an instant cash offer at the crazy low list price their agent has suggested. And since they prefer cash, why would they offer seller financing? This is why the listing agent doesn’t even ask them to consider carrying the loan at the outset. It takes a few months for sellers to realize that they will have to negotiate with buyers on price or offer financing if they want to sell. That’s why financing is often not advertised, and you have to ask about it to learn if it might be available.

Pro tip: On seller-financed vacant land, down payments are typically 10–50%, interest rates tend to be 4–10%, and terms are 1–15 years. If the land is listed with a Realtor, do not offer less than 15% down. This is because the seller will have to pay Realtor commissions of 5–10% out of your down payment. For example, suppose the commission is 6%, and you were to offer a super low down payment, such as 3%. To accept, the seller must reach into his pocket to pay the commission and closing costs. The chance of the seller agreeing to write a check while transferring the title to you is virtually zero. Land sellers like to receive money, not spend money.

Conclusion

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

Seller financing…Genius!