Seller Financing on Vacant Land: What You Need to Know

While many people view land as the ultimate “hands-off,” long-term investment, some landowners are able to turn their investments into an immediate income stream using an instrument called “owner financing.”

Owner financing—sometimes called seller financing—is pretty self-explanatory. Instead of a buyer getting a loan from a bank or mortgage company, the person selling the property lends the buyer the money for the purchase. The buyer and seller execute a promissory note providing an interest rate, repayment schedule and consequences of default. So for all intents and purposes, the owner takes the place of the bank, save for one aspect of the loan.

Unlike a traditional mortgage or bank loan, the property owner is not actually advancing any money to the borrower. Rather, the seller is granting the permanent use of the property and accepting payments for it for several months or years into the future. And therein lies one of the greatest aspects of owner financing—it can provide the landowner with an ongoing income stream.

In this case, the stereotypical long-term land investment is turned into a passive income source immediately, meaning regular earnings which the landowner is not materially involved in since, obviously, land doesn’t require any maintenance or upkeep.

Owner financing real estate is somewhat uncommon, particularly when it comes to the housing market. This is because in most cases the seller relies on the proceeds from the sale to finance their next home purchase.

Vacant land is a different story. More often than not, the land is strictly an investment. Because it’s undeveloped, the owner is not usually looking to replace it with a similar asset, but continue to cash in on the initial investment by receiving interest payments on the loan.

So, what are the benefits to the buyer?

From a buyer perspective, there are a number of advantages to securing owner financing, not the least of which are closing costs. Because as a buyer, you’re not dealing with the bank, you can avoid paying appraisal costs and bank fees. This greatly reduces the closing costs, which means that you can purchase the property for less.

The down payment may also be lower that the mandated minimum. Again, because you’re dealing directly with the seller, the down payment will be whatever you and the seller agree to. Furthermore, the closing process is much more expedient. There’s no legal department to wait on, nor is there an underwriter or loan officer passing the file on your transaction back and forth for weeks on end.

In all, this unconventional financing method allows buyers to get into properties quickly, and sellers to minimize carrying costs.

Are You Looking for Seller-Financed Land for Sale in North Florida?

If you’re looking for owner-financed land for sale in North Florida, we can help you find the perfect property.

Call us at 386-243-0124 or get in touch with us online. We’ll be happy to begin searching right away.

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