Anyone experienced with owner financed land purchase?
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    Anyone experienced with owner financed land purchase?

    The wife and I have been wanting to purchase land to build our dream home on within the next 5-10 years.
    I've inquired with our credit union and a local bank and they both seem to shy away from land financing with out 50% down. The wife and I both have great jobs but with three kids in daycare saving cash can be a struggle. Home prices in my area are quite soft now but land prices seem to remain solid.

    I've run across a few sellers that are offering owner financing with a little cash down. I found a 5+ acres parcel that I really was interested in but the seller wouldn't get the land surveyed and mark so we could see the actual property boundary's. He also would not allow any improvement or access to the land until paid in full.

    Any of you guys have any experience either buy or sell you'd be willing to share?

    Thanks
    Matt

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    PikeCoGreenTractorMan's Avatar
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    Quote Originally Posted by Gwhunter View Post
    The wife and I have been wanting to purchase land to build our dream home on within the next 5-10 years.
    I've inquired with our credit union and a local bank and they both seem to shy away from land financing with out 50% down. The wife and I both have great jobs but with three kids in daycare saving cash can be a struggle. Home prices in my area are quite soft now but land prices seem to remain solid.

    I've run across a few sellers that are offering owner financing with a little cash down. I found a 5+ acres parcel that I really was interested in but the seller wouldn't get the land surveyed and mark so we could see the actual property boundary's. He also would not allow any improvement or access to the land until paid in full.

    Any of you guys have any experience either buy or sell you'd be willing to share?

    Thanks
    Matt
    Matt - I don't have any direct experiences with land contracts, but I know folks who do and there are varying opinions about them. One avenue that you might explore is your county auditor's office. Many have their own websites, usually using a .org domain, and these can be a great source of public property search information. I live in Ohio and my wife and I own property in two counties. Either county's auditor website is useful in finding public info using an owner's name, address or tax parcel number. The sites have graphical interfaces that allow you to superimpose the tax parcel boundary over an areal photo map. For a small fee, you may be able to purchase an areal map of the five+ acre parcel that you are interested in. For another small fee, you might be able to purchase a copy of the recorded deed along with the boundary description. I get that the landowner does not want to grant access without being paid; having access prior to making an offer might be a negotiating point. If the property description has steel pins as the corner markers and the areal map includes easily recognizable features such as buildings or large trees, you might get a usable idea of the property extent without having to walk it or survey it. Some of the very old surveys use archaic marking features such as tree blazes, scribed rocks, etc. that often change with time and are difficult to find even for an experienced surveyor.

    Good luck with your search. One thing is for certain- land is one thing that there is not much more being made right now save the volcanic islands.

    Brian
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    There are two ways to do owner financing. One is a proper, legal mortgage with the seller being the lender and the other is a land contract.

    I would never do a land contract from either side, ever, for any reason. There are too many ways for something to go wrong, because the buyer doesn't own anything. If the seller goes bankrupt, suddenly you're fighting to prove that the property that's still legally his, is yours. If the seller is involved in a car accident and sued, the property is still legally 'his' asset to be taken in the suit and your only recourse is to take the seller that just lost everything to court and try to get your money back. While it works okay when everything goes right, in the real world we can all probably point to a situation where everything didn't go right.


    Decide what kind of payment you could afford to make, and pay that to yourself in a separate bank account for a couple of years then revisit the idea of purchasing something. Sure, it sucks not to be able to buy right now but you'll be better off in the long run. That's just my opinion though.
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    My youngest son, Elvis, and I have bought our last 2 property parcels through "private sellers".
    First property was 32.38 acres for $25G, from a local farmer who sold is tobacco allotments and wasn't allowed to grow tobacco on that land anymore.
    I was still working at the time, and had ideas of us both building houses on the same land and having a small (10-12 cows) herd for personal consumption of half the herd and selling the rest of them at market.
    Also had the idea of 6 wild-roam hogs for personal consumption, along with a few goats for weed / shrub control, and maybe a dozen chickens for eggs and meat.
    Elvis thought it over, and decided he wasn't interested in tending to those "critters", so we held on to the property for a year and sold it for $51G.
    Enough turnover profit that we bought a 6 acre tract from another private seller, cleared out a boatload of trees we didn't want, root-raked the property, and put us 2 places on that land.
    Been here 15 years now, never had any problems with the seller signing contracts that WE generated, and happy as one could be.
    That being said, I have heard many a bad story of "deals gone bad" with folks who didn't do their homework on contractual agreements.
    The I.R.S. must love poor folks, they create more and more every day.

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    GWHunter - some good advice has been given so far. I'm a CPA although I don't practice any more. As 56FordGuy said, there are two ways to do this - a proper mortgage held by the owner or a land contract. The former is fairly rare and are usually short term. In other words, the seller holding the mortgage is only financing you for 5-10 years (terms vary) with a "balloon payment" for the balance at the end. So, your payments are based on a 20 or 30 year payment schedule to get them low, you pay for X number of years and as that time is coming to a close, you go to the bank and obtain "conventional financing". If something goes wrong and you miss some payments, you have the same rights as you would if you had financed through a bank. Repossession has to go through the courts, etc. As 56FordGuy also pointed out, land contracts mean that you don't get title to it until you're done paying the seller. It's a very common and not necessarily a good way to go. I've had a lot of friends (including my ex-business partner) and clients that owned rental property and they often tried to get rid of various properties via land contracts. ALL of them had to take back at least one of those properties. And the buyer ends up with nothing since they never had possession. In other words, you could pay for 5 years "building equity" and then miss a payment or two. Then the seller repo's the property and you end up with nothing. Also, if the seller still owes money on the property and you're paying him but the seller isn't paying who he owes.... you're scr**ed again. That actually happened to my brother. Fortunately he found out within a few months of doing the contract what was going on so he didn't lose too much. So, I would concur with 56FordGuy to stay away from it.

    If you decide to purchase, GET YOURSELF A LAWYER to write up the contract. Even if the seller has a contract, GET YOURSELF A LAWYER to look it over. Even if a realtor is involved, GET YOURSELF A LAWYER to go over everything. Remember, contracts are written by lawyers and you want to make sure that someone in your corner is looking out for you. It will only cost you a few hundred bucks to do this and will be well worth it.

    56FordGuy also gave you some GREAT ADVICE by suggesting that you make a payment to yourself to build up some cash for a down payment. I know that things are tight with a couple of kids (been there!!) but you would be surprised at what you can cut out of your household budget if you make a few sacrifices. Do you really need the super cable package? Hold on to your car until the repairs start getting too high. Etc, etc etc... Check out some of Dave Ramsey's stuff for good advice.

    If your employer offers direct deposit to more than one account, set up a savings account at a local bank and have $100 or $200 per month put into it. Open the account at a bank that you don't currently bank at and make sure it's a SAVINGS account and not one that comes with checks. Don't set up online transfers or bill pay. The idea is that you want to make it as inconvenient as possible to get to the money. It's there if you NEED it, but you really have to think about it before going to the bank to withdraw it. You'll be surprised how quickly it adds up.

    Also, pay off your credit cards!! Again, read Dave Ramsey's stuff!! Consumer reporter Clark Howard also recommends "freezing your credit" by putting all of your cards (except maybe one that you can use for online purchases, etc. - and pay it off every month!) in a bag of water in the freezer!! That way you don't affect your credit score by closing accounts, you have the cards if you NEED one but you have to make the conscious decision to thaw out the block of ice to get to the card(s).

    Remember that sacrifices made now will pay huge dividends in the future!! Good luck to you and your family!!
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    Quote Originally Posted by 56FordGuy View Post
    There are two ways to do owner financing. One is a proper, legal mortgage with the seller being the lender and the other is a land contract.

    I would never do a land contract from either side, ever, for any reason. There are too many ways for something to go wrong, because the buyer doesn't own anything. If the seller goes bankrupt, suddenly you're fighting to prove that the property that's still legally his, is yours. If the seller is involved in a car accident and sued, the property is still legally 'his' asset to be taken in the suit and your only recourse is to take the seller that just lost everything to court and try to get your money back. While it works okay when everything goes right, in the real world we can all probably point to a situation where everything didn't go right.


    Decide what kind of payment you could afford to make, and pay that to yourself in a separate bank account for a couple of years then revisit the idea of purchasing something. Sure, it sucks not to be able to buy right now but you'll be better off in the long run. That's just my opinion though.
    Exactly my thoughts as well - well said!
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    Wow, really good advice and exactly what I was looking for.
    A few additional notes to the replys. I've got a small down payment set a side already, the 5 acre lot actually sold a few months back. I was using it as more of an example. I had contacted the town zoning folks(for that lot) to discuss the boundy's and zoning. I'm finding that land in my area is all over the place pricewise with little rhyme or reason. So I'm having a hard time assessing valves. I have talked to several real estate agents but got the feeling they were more interested in quick commission's and not really too concerned with helping us locate the right property.

    If the right property came along I'd like to finace it for a short term, no more than 5 years. The credit union we bank with told me that if I own the land outright they will guarentee the construction loan. I'm only 35 so this is my first real attempt at a long term plan. I'd ideally like to purchase the land, pay it off then build a modest home with a 15 year mortgage. I figure this is the safest way to sail towards retirement stabilty.

    If the right property were to come along and a similar identification of the property lines issue arose would I be crazy to eat the cost of the surveyor?

    Matt

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    You have a good plan of attack for your age (financially) good for you! It just drives ke nuts when I read about people in their late 60's who still have 20-25 years left on a 30 year mortgage.

    You might very well have to foot the bill for a survey. I wouldn't touch any piece of land without one - you have to know exactly what you are buying. Another point is a title seach. With a conventional mortgage for a home one of the things you are paying for (mandatory with most all banks) is a title seach on the property which looks for any leins. If you would be attemtimg a private purchase you will have to have this done on your own also.

    I bought a piece of property adjacent to mine some years ago (to ensure my privacy into the future). I knew the seller very well but still had the survey and title search done at my expense. To me it really wasn't that big of a deal at the time and gave me 100% peace of mind. As far as the financing I had about 50% of the down payment and took out a home equity loan for the balance.
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    Ideally, I'd love to take out a home equity loan on my current residence but the reality is although I've been here 11 years I have 0 equity due to home prices. The three homes adjacent to me were foreclosed on within the last 5 years and sold for about 50k less then I paid from my home. I don't feel too bad about it as most are way underwater in there houses in the area. As it was my first home and I purchased when I was only 23, I could have ended up much worse.

    At this point I'm along for the ride and when and if the market returns I'll sell it. The part that strikes me as odd is the land prices really haven't depreciated like house prices in the area.

    The current situation has shaped my long term plan in a big was as I never want to be stuck in a property again if I can help it. And having a mortgage into my retirement years is also something I'd rather not be saddled with. But hey, I probably could have retired in my late 40's early 50's if it wasn't for these damn expensive kids!!! JK.

    Matt

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    Quote Originally Posted by Gwhunter View Post
    The wife and I have been wanting to purchase land to build our dream home on within the next 5-10 years.
    I've inquired with our credit union and a local bank and they both seem to shy away from land financing with out 50% down. The wife and I both have great jobs but with three kids in daycare saving cash can be a struggle. Home prices in my area are quite soft now but land prices seem to remain solid.

    I've run across a few sellers that are offering owner financing with a little cash down. I found a 5+ acres parcel that I really was interested in but the seller wouldn't get the land surveyed and mark so we could see the actual property boundary's. He also would not allow any improvement or access to the land until paid in full.

    Any of you guys have any experience either buy or sell you'd be willing to share?

    Thanks
    Matt
    My wife and I were looking to do something similar year, and ended up getting a "Holiday helper" loan from our credit union (basically a special low rate personal loan) and used it to pay for the land rather than getting a land lot loan. Much lower interest rate from a land loan and no worry about appraisals and what not. We used it to buy 5 acres. Up side is you basically get cash to work with when you buy the lot, down side is it had a maximum term of 5 years so payments were pretty hefty. They also had a maximum loan amount so we had to pay the difference.

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