Pros & Cons of Owner Financed Land

If you’re like most people and don’t have a ton of experience buying land, you may not be familiar with the common practices of the market. While owner financing is rare in home-buying, it’s a common practice in land-buying. And like any other investment, it’s always good to weigh the pros and cons of various options to make an informed decision, right?

So let’s break down the important things to know about purchasing land directly through the landowner, and whether it’s the best way to go on your personal land buying journey. Enjoy!

What Is Owner Financed Land?

Owner financed land is just what it sounds like: land that’s sold directly from the owner. This means that there’s no bank or mortgage lender involved. Often, the seller will want to do a credit check on the buyer before the two enter into an agreement, but this is usually the extent of the verification process.

Sometimes called seller financed land, this type of agreement is spelled out in a contract that both parties sign. The seller of the land will usually ask for a down payment and extend the buyer enough credit to purchase the property over the agreed upon contract term.

Owner Financed Land Pros

Let’s first look at owner financed land pros, and then we’ll look at the cons.

Quick and Easy Approval Process

Since there are no banks or mortgage lenders involved in an owner financed land transaction, it’s usually a much faster and easier approval process than purchasing a home. Those buyers who may be rejected by a bank for a loan could still purchase land, provided the seller agrees to the terms.

Whereas banks and mortgage lenders have stringent rules for creditworthiness, private sellers are often willing to work with buyers. At Land Elevated, we offer many purchasing options for a wide variety of financial situations. We want to ensure that everyone has a chance to purchase their dream land, so we’re always willing to work with buyers, offering some of the lowest interest rates around.

Favorable Down Payment Options and Loan Terms

Federal regulations don’t dictate owner financed land transaction details like they do with many home purchases. When you go through a bank or mortgage lender to purchase a property, you’ll have to provide a minimum down payment as determined by the bank or the federal government.

But when you purchase land directly from the owner, there’s much more leeway in the down payment options and loan terms. Since there’s no federally required minimum payment, it’s easier for private sellers to work with buyers, providing favorable loan terms for those who have money to put down, and allowing for lower monthly payments for those who would rather pay over time.

Less Paperwork and Fewer Fees

Another benefit of purchasing owner financed land is fewer fees and less paperwork. There are rarely appraisals or inspections. And there are never any bank fees since the bank won’t be involved. Not only does this mean less paperwork, but it means fewer upfront costs, as the buyer usually has to pay for the appraisal and inspections when purchasing a house.

An Overall Faster Transaction

When purchasing owner financed land, you aren’t hampered by anyone else’s timeframe. Closing on a house can take months, but purchasing seller financed land can be much quicker. Once you have done your due diligence on the property and have come to an agreement with the seller, there’s nothing else holding you back from closing on the property!

Owner Financed Land Cons

Now that we’ve covered the pros, let’s look at the cons. Keep in mind as you read that these cons vary widely by seller. In fact, with the right seller, these aren’t usually issues at all.

Must Be Approved By Owner

When purchasing owner financed land, there’s no guarantee that you’ll be approved by the seller. Just like you could be turned down for a loan by the bank, you could also be turned down by the owner. This could be for any number of reasons, including your credit history or the maximum amount you’re willing to pay as a down payment.

We provide multiple purchasing options on our properties, and there’s never a lengthy approval process. With Land Elevated, the days of needing perfect credit to purchase land are over. And since we own all our properties outright, we can offer very fair interest rates.

Watch Out For Unethical Businesses & Scams

One of the major challenges buyers face when looking to purchase owner financed land is the vetting process. Just like with any business, if you fail to do your due diligence, it could be disastrous. In some situations, buyers discover that the title isn’t clean. Or, they find that the seller was dishonest about some aspects of the land. With so many potential pitfalls, it’s important to know that you are dealing with a trustworthy seller.

So be sure to choose an established trustworthy company with an excellent track record for your owner financed land purchase, or if you’re buying from an individual, do your research to make sure they are being honest and fair. If anything doesn’t seem right or it seems “too good to be true,” be prepared to walk away.

Less Flexible Interest Rates

Since mortgages and bank loans are uncommon in owner financed land deals, many buyers have a hard time finding flexible interest rates. Those private sellers who are willing to extend a line of credit often ask for high interest rates and a large down payment, since they’re taking on most of the risk. And for many people, the combination of inflexible interest rates and down payments are prohibitively expensive.

Our mission is to make landowning a reality for all, so Land Elevated offers flexible interest rates and down payment options. Those who can afford to put a little more down on their land can enjoy lower interest rates. Those who want lower monthly payments without a large down payment can also find favorable options on all our properties.

Conclusion

Buying your dream land doesn’t have to be a long, arduous, and expensive process. In fact, it shouldn’t be. Owner financed land is very common in the raw land market, but it’s “buyer beware.” The drawbacks can outweigh the benefits of owner financed land if you can’t trust the seller.

Purchasing land through Land Elevated gives you the pros without the cons. We provide a clear-title money-back guarantee on all our properties and are always willing to work with you by providing multiple options and incredibly low monthly payments. Contact one of our Land Specialists today to see how owner financed land through Land Elevated can get you the property you always wanted.