Land for sale by owner is an increasingly common way to transact both land and property deals.
Most people are familiar with home buying and securing mortgages.
Lots of begging and grovelling at the bank.
Lots of minimising the amount of Starbucks coffees you have 6 months before you apply as you know the bank officer will be going through your expenses with a red pen!
Lots of rejections and lots of waiting and finger crossing.
Sometimes people assume buying land is the same process.
It is, however, a very different beast.
For most people, quite frankly, there is no bank lending available for land.
Parcel values are often not high enough for a bank to be interested.
It may also be that as less transactions are conducted in very niche areas with land deals that the bank feels nervous about valuing them. They simply do not have enough data to fulfil their algorithms and pricing models.
The problem for most buyers is that like home lending, you will need excellent credit score, a substantial deposit saved up and be able to provide huge fees to the lender.
This might count you out straight away!
What if you earn good money but your income is sporadic due to you being self employed? The bank will say “No”
What if you missed a couple of payments here and there? You may have a bad credit score. The bank will say “No”
What if you have just started a new business and are bringing in good cash flow? The bank will say “No”.
They generally want 3-5 years trading history.
Land for sale by owner is a perfect solution for the buyer.
Investopedia shares some reasons why buyers love it
1. Less closing costs
By dealing directly with the seller, the buyer immediately cuts out many of the people in the middle collecting large fees. This is a huge saving that can go straight to their purchase instead of wasting it on paperwork and admin.
2. Quicker, simpler, cleaner
Land for sale by owner will become an increasingly common way to do business with both residential housing, commercial property and land deals.
3. More flexibility in negotiating the terms of the deal
The size of the down is not mandated by a government or bank. It is simply determined by a conversation between the buyer and seller. If the seller is asking $5000 down but you only have $3500, feel free to ask if they will accept that if you make slightly higher monthly payments or pay slightly higher overall cost.
Most sellers are prepared to work together to get a deal done.
Even though the seller will inevitably will be a lovely person 🙂 this is still a business transaction.
Do not fall into the trap of thinking you are now “buddies” and that if you miss a payment or two “they will understand” and you can make it up later.
It will not work like this.
Of course all deals work better if you are friends, to a certain extent, as there needs to be trust and rapport on both sides.
Of course the deal when buying land for sale by owner, will involve a lot less paperwork and hassle and be less formal than approaching a bank.
However, there will still be a negotiation, contracts to sign and consequences to pay if you fail to fulfil your obligations.
In a land for sale by owner deal, the seller is becoming the bank.
The seller is taking a risk on you.
You will be signing a contract that has legal consequences. If you do not understand anything, always ask or get legal advice from your trusted attorney.
The loan term in a for sale by owner deal will typically be less than a 30 year bank mortgage.
Remember the seller does not have unlimited funds.
They are generally an individual citizen, like you, who also has obligations like paying for their kids college, making their own house payments and putting food on the table.
They need the cash too.
The term might be for 2-5 years.
But it will not be 30 years.
The seller will allow you to use the land in many cases after having signed the contract without you having paid for it in full yet.
1. Do your own due diligence. When buying a house, you are more likely to use an attorney to check it out for you and represent your best interests.
In a land for sale by owner deal, you are less likely to use an attorney as the value of the land may be less than attorney fees, so it may not be worth it.
Also if there is no house on much of the vacant land, there is not much that can go wrong- no tiles to fall off the roof, no bad plumbing to investigate and no dodgy foundations.
However you still need to check it out. Either pay for an attorney or be thorough in your own due diligence.
Download our free checklist on How To Buy Land Safely and Profitably
2. Check that the seller actually owns the property and has the legal right to sell it to you.
3. Check that there are no liens or back taxes against the property.
4. Ensure you understand the zoning of the land and what you can and can’t do on it.
Bad luck if the land is zoned farming only but you bought it to put up a multi family property.
5. Ensure a correct deed and land sale contract is drawn up. Negotiate the price and the terms depending on your goals with the property.
6. Check when you can legally use the land. Sometimes you will be able to go camping, ATV riding and hunting on the property but may not be able to start construction until you have fully paid it off.
Often this is due to county regulations, not the owner being “difficult”.
The county will need to see that the land is in your name before granting a permit. Some counties will allow construction if the owner gives their permission in writing.
Some buyers purchase their land for sale by owner method but seek bank funding to build the house.
Often banks are happy to provide this lending but they too will need to see that you hold title in your name. They will not provide finance to a house on land you do not own.
7. Disclose to the seller if you have bad credit. Some will want to do an official check. Some will not.
Check if the seller will be charging an interest rate and ask what it is. Check if there are any early repayment charges with your land for sale by owner deal.
Check what the land taxes are as you will be paying these along the way.
8. Check what the consequences are if you miss payments for whatever reason.
How long will you have to correct the error and catch up with your payments before the land is repossessed?
It may be 30 days or it may be 60 days but do not take this lightly.
If you stop making payments and stop communicating with the owner, they will take back the land and will keep the monies you have paid on it. After all you have used the land in that time and made a legal contract to pay in full and on time.9.As always, do not over extend yourself and only purchase land that you can afford.
Ok, so we know that buyers love to buy in a land for sale by owner deal.
But why would the seller want to sell land for sale by owner with the risk that the buyer stops paying and they won’t get their full price.
They may have to repossess the land and start marketing the property all over again?
Nobody wants that hassle!
Generally it’s for the exactly the same reasons as stated above.
From the seller’s point of view, the deal will be able to be done quicker, cheaper, and easier than waiting around for a buyer who can come up with the full cash price.
Think about it:
Buyers may want the land, but not have all the cash available today. They may need finance but if the banks are not lending on most land parcels, then sellers can struggle to sell their land.
The seller has the choice of either waiting for years until a buyer comes along with cash or go down the land for sale by owner route and be able to sell today.
They are taking the risk that the buyers will be able to pay in full eventually.
The seller may have other reasons to get the deal done quickly.
Perhaps they have a medical emergency.
Perhaps they have been transferred overseas with work and would rather their land was sold.
Perhaps they need the money to fund their new business idea.
Perhaps they have their own debts that they need to pay off.
Allowing the sale to occur via the land for sale by owner method allows for a much faster and less costly transaction.
Generally the buyer and seller work directly with each other. There is no loan officer, less paperwork, less middle men along the way which can delay property transaction by 2-3 months.
With less middlemen involved taking their fees, closing costs are considerably less for both parties.
Most of our land at Vacant Land Usa is available land for sale by owner.
Remember we are the owner of the land, not a broker.
So feel free to get in touch and negotiate and we will try to work something out.
We see all sorts of configurations.
Many people find a parcel they like and wish to secure it right away.
They pay a down payment and set up monthly payments.
Some continue like that until it is paid off.
Others prefer to pay it off early and get the full ownership in their name asap so they can get on with their building project.
You can read a few examples of land for sale by owner deals here
If you are interested in the parcels we have available on land for sale by owner, you can check them out here.
If you want to make an offer or tweak the terms a little you can always ask.
Some people prefer to pay a higher down and reduce the monthly payments.
Others have minimal down available but can pay a higher monthly.
Some people have a significantly larger down payment and may request a small discount or others have cash and prefer to pay in full right away and reduce paperwork.
At Vacant Land Usa, we do not do credit checks
We do not require your bank statements
We will not ask how many Starbucks you drink per day 🙂
As a land for sale by owner deal is based on trust, many times once a deal has been completed, if the seller has more land available and the buyer wants more land, these two parties may continue to do more dels in the future.
The buyer may want their friends or siblings to buy the land next to them. If the seller happens to own these as well, it is a match made in heaven.
We have found this happens many times.
Initially the buyer may be hesitant about the process initially if they have not done it before- it’s only natural.
Once the deal is completed easily and quickly, they cannot believe how easy it was and often want more land or request some acres for their friends or family members.
There are so many ways to buy land. Just because you learn how to buy a house with a bank’s approval and your lawyer’s permission, does not mean this is the only way to do things.
Many industries are being disrupted now through the power of technology which is super exciting.
Many middle men with their “fat cat fees” are being cut out as now buyers and sellers can reach each other more easily through social media and online advertising.
If the buyer and seller can have a chat and work out the basics between them, without middlemen slowing things down, the transaction can happen quickly, simply and easily.
Of course you are still free to use a title company to check correct ownership of the land and ensure there are no liens on the land. If it is a high value transaction with specific requirements, you may still choose to have an attorney review the documents or review the deal.
Or you can choose not to use these services for low value purchases- its up to you.
In any deal, communication is key and buying land for sale by owner is no different. Keep channels of communication open with the seller.
Continue to ask questions if you are unsure of anything.
Let sellers know if anything changes in your situation and alert them in advance if you may have a late payment for any reason.
Most people are reasonable and will work with you- especially as you both have the same aim and aligned goals. You want to buy and own the land, they want to sell and get paid.
Overall the volume of land for sale by owner will continue to increase making it easier to buy and sell land and improve the value of the market for everyone.