How to Buy Owner Financed Land Through a Title Company?

Are you wondering how owner financing land works when closing through a title company? 

My name is Felicia I’m a land investor and a partner at Compass Land USA. If you give me even just a few minutes of your time here I’ll help you to understand the owner financing process and how it’s different when closing through a title company – so you can be protected and ready to use it for your next land purchase.

Why Owner Finance Land?

It can be really difficult for you to get a loan for a land purchase for 2 reasons:

1. The land itself is the only on-site collateral to the loan
2. In the eyes of the banks, land is not easily converted to a built home

Ok, but what does that mean? It means that banks and other traditional lending institutions don’t like that the land itself is the only collateral, they prefer to have a structure like a house or some other tangible asset on the land. 

And often, the purpose of a land purchase is to enjoy it recreationally – not to make it your immediate primary residence. And that’s the key here because unless you’re building on it and making it your primary residence right away, it’s very unlikely that you would get a traditional loan if you wanted to buy land to hunt, as an investment, camp, or use recreationally. 

Because of those 2 points, investors like myself will owner finance properties for you. This means that we will carry the loan for you, so you don’t need to involve a bank or other lenders.

So, instead of making payments to the bank, you would make payments to the property owner. Sometimes for larger value properties like 20,30, 50k, and up, the loan will be managed through a title company instead. I’m going to identify that process for you in a minute here. 

❗️Tip❗️: Before you start this process, you should confirm that the owner has the right to sell the property. The title company will verify this but it doesn’t hurt to check before things get started and save yourself some money.

If you’re wondering how to buy owner financed land for sale by owner, make sure you grab a copy of the guide below because I detail out everything there for you. 👇

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Alright, so the part you have patiently been waiting for…

How to Buy Owner Financed Land with a Title Company?

How does this process work if a title company is involved? If you choose to close your owner financing purchase through a title company (which is a great idea for higher-value properties), these are the steps to follow. 

So first, you need to select a title company. Yes, this is obvious. But often the seller will leave the title company selection up to you so you need to make sure you do your homework on that. 

Next, the title company will prepare a Promissory Note, Deed of Trust, and Deed. Some title companies will send this packet to you via email, some will send it via mail.

Some of the more common signing services like SignNow and DocuSign are widely used in the real estate industry. This is the fastest way to get the documents over to you for your review and signature.

❗️Tip❗️: So if the title company suggests regular mail, I would definitely request email instead.

You are probably wondering what each of these documents is, right? Ok so:

What is a Promissory Note?

This document states the terms of the sale, so how much you are going to pay a month, for how many months. It will also detail out the interest rate if there is one, the starting principal balance, all that stuff. So that is your part of the promise as the buyer.

This document will also spell out the seller’s promise to you. If you promise to pay off the property in full, per the terms, the seller in return, promises to deed you the property.

So at the end of the payment period, once the property is paid for in full, the seller will issue you a deed for your property.

❗️Tip❗️: And if they’re any good they will also record the deed with the county for you, and cover transaction costs – another thing to watch out for! 

What is a Deed of Trust?

This document is an agreement between a lender and a borrower to allow a 3rd party to serve as a trustee (remember in this case the title company is the 3rd party). The trustee will hold the ownership of the property until the property is paid for in full.

The ownership is actually transferred at this stage from the seller to the buyer, but the title company doesn’t release or record the transfer until the property is paid for. 

What is a Deed?

This legally transfers ownership from the previous owner (the seller) to the buyer, you!

If you want to learn more about the different types of deeds, you can do so here.

At this time, you as the buyer are going to need to submit a down payment and the title company fees. The down payment goes toward your total purchase price. And the title company fees – well you’re paying them to get all the paperwork and filing done for the transaction and to manage the loan so there are some fees associated with all that.

Now we’re at the easy stuff, the set it and forget it stuff. So once everything has been signed, the title company should help you set up monthly payments. They’re going to be the ones managing the loan on behalf of the seller. So each month the title company will collect the monthly payment from the buyer, and distribute it to the seller. 

Ok, I know that must feel like a ton of information, so let’s go over those steps again real quick. 

Steps to Buying Owner Financed Land Closing With a Title Company

1. Select a Title Company.
2. Notify the title company of the verbally agreed upon financing terms with the seller. 
3. The title company will prepare a Promissory Note, Deed of Trust, and Deed, and send for signing to the buyer and seller.
4. Everyone is sent a signed copy of the documents. The Down payment and title company fees are processed at this time. 
5. The title company will collect all future monthly payments from the buyer and distribute to the seller. 

❗️Tip❗️: Don’t forget that while you’re making payments on the property, a lot of sellers will let you start using that property immediately.

So for example the way I operate is that as soon as you get to step 4, the property is effectively yours. You can get out there and camp, RV, enjoy it with your family, trim the trees, just relax. 

How is this Different than Buying Owner Financed Land for Sale by Owner?

There are 3 key differences when owner financing land through a title company.

• First, you get title insurance (this means the closing costs are higher).
• Second, the title company acts as an independent 3rd party throughout.
• Third, property ownership is transferred at signing rather than after completing monthly payments. And that last one is the big one.

If you are wondering how this process works when you are owner financing land for sale by owner, make sure you grab the free guide below because I have the steps listed in there for you, along with the normal owner financing process and some other tips that will really help you get a great understanding of how owner financing land works. 

Where to Find Owner Financed Land for Sale?

One common question I get asked is where do I find owner financed land for sale? A lot of people spend their time searching on the MLS, realtor.com, Zillow, Trulia, and these sites are great – but they don’t specialize in owner financing because a lot of realtors don’t do that.

Owner Financed Land for Sale by Owner

Some great places for you to look for owner financed land for sale by owner would be a website like mine, CompassLandUSA.com, we have a ton of listings, we get new properties on a weekly basis.

And we actually normally have 3 owner finance plans per property, so there’s lots of flexibility and options for you there. We also don’t do credit checks and we don’t charge a prepayment penalty.

Another couple of great sites are RuralVacantLand.com, Land.com Network (they have a couple of sites under their umbrella for you to choose from).

Owner Financed Land – Your Secret Weapon

Alright, so as you can see, owner financing a land purchase is an awesome tool for you to use.

It’s faster and easier than traditional financing, it has much lower closing costs than a bank would, and oftentimes you get immediate access to your new property (aside from building). 

I hope you found this post helpful! If you made it this far, thank you so much for reading, and for taking the time to educate yourself on how to buy owner financed land.

If you are looking for great deals on land make sure you check out my website CompassLandUSA.com, and if you have any questions leave a comment below and I’ll reply with your answer and help you out. Thank you so much for reading, and I’ll talk to you soon. 🙂 

P.S. If you’re a first-time land buyer check out these questions you need to ask when buying land.

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