How to Buy Owner Financed Land

Are you looking to buy owner financed land for sale and you’re wondering how owner financing land works? 

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 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. If you’re interested in how that specific process works, make sure you get a copy of the guide because I detail it out in there for you.

❗️Tip❗️: Before you start this process, you should confirm that the owner has the right to sell the property and that there are no huge outstanding taxes or debts owed against the property.

If you’re wondering how to buy owner financed land with title insurance, 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?

The owner financing process for buying land is fairly straightforward. It should be almost the same regardless of who you buy land from. 

So first, the seller is going to require a deposit or down payment. Two different names, either way, you have to put some good earnest money down upfront. The down payment will vary depending on the type of land and its purchase price. Sometimes it could be 5, 10% or maybe it’s a thousand, a couple of thousand dollars again depending on the price of the property. 

❗️Tip❗️: The seller should take care of all the legal paperwork, filing with the county, all that important stuff if they’re charging you a Doc Fee so make sure you ask about that. 

Second, the seller will send you a Promissory Note and a Land Sale Contract. Hopefully, you are dealing with a professional, and they send you all the documents right to your email inbox via an online signing service.

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. 

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 Land Sale Contract?

This document will detail out the property that you are purchasing, it should have the parcel number and legal description because these characteristics uniquely identify the property.

So it will say this is the property you are purchasing, and this are things you can and cannot do on the property while you are paying it off.

It’s really common for investors to say no building on the property, for instance, until it’s paid off. More aesthetic stuff is normally ok, like camping and RV, putting up a fence, taking down trees, all that is normally fine to do while you’re still paying off the property.

That would be totally fine by me, but not every investor runs the same way so make sure you check the Land Sale Contract, and don’t be afraid to ask the seller if you have any questions. 

Now we’re at the easy stuff, the set it and forget it stuff. So once everything has been signed, the seller should help you set up automatic monthly payments. This is great for you so that you don’t have to remember to send your payment every month and risk forgetting, and then risk paying a late fee. This is the easiest solution. 

Lastly, at the end of the terms period, once the property has been paid for in full, it is deeded to you.  (If you want to learn more about the different types of deeds click here.)

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

1. Submit the Down payment and Documentation Fee. 
2. Promissory Note and Land Sale Contract are sent and signed by the buyer and seller. 
3. Signed copies are automatically sent to the buyer and seller. 
4. Set up your automatic monthly payments. 
5. Once the property has been paid for in full, it is deeded to you. 

❗️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. 

If you are wondering how this process works when you are owner financing land with a title company, 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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