While Buying Land, Try Owner Financed Land for Sale So As to Get Financing Flexibility

When you dream of owning your own piece of land in a beautiful countryside, there are so many things you might have in mind. Maybe a snug and beautiful house tucked away perfectly somewhere in a lush green forest or out on a plain with miles of knee high grass bowing to the wind and the sound of cattle in your barn. If you are more adventurous, you might envisage brandishing your favorite rifle within a hunting ground with games galore.

With dreams and hopes you go to your real estate agent, who gets you through all the procedures. He shows you images and information of many places that fire your imagination even further. Lands abound with wild games and outdoor sports, leaving you charmed and lost for words. However, after all the prompts and show, he stabs your dream with the price tag. After that, none of the other finance options that he explains sounds helpful.

This is a normal phenomenon while one sets out in search of a piece of land now days. Therefore, a thorough research is required on both the land you want to own and also the real estate agent or organizations that will help you get it. Researching on the land gives you a prior idea of what it is like – the value, benefits and disadvantages if there is any and so on. You can gather an ample amount of information from the Internet on your own. With the knowledge of the land, you should also find out about the realtors as much as you can. Some points you can look up on the realtor’s website are:

Their range of selection – You will have more choice with the one that has a larger range.
Information – Details like images of the actual land and surroundings, maps, charts, data, etc., are important as there should not be any unwanted surprises when you reach the actual place later.
Financing – Different realtors has different ways of catering to their customers. You can get more options and flexibility from the better ones.
Efficiency in handling the whole deal – This includes the paperwork, customer service, transaction, transfer of ownership, etc.
Credentials – This characteristic speaks volumes about the organization, they should have a real and proven record of experience in the field and genuine customer testimonials.

One of the greatest challenges of aspiring land owners are the modes of payments and finance. Most of the realtors will sell you only for a hundred percent payment or you say goodbye to your dream property. The banks are no better, they might be ready to finance you but with their killer rates, that will punch a hole in your bank account. However, if you search more keenly, you can find some real estate agents who sell their own lands. Since all of the land that they sell is the land that they own, they are able to provide you easier owner financing.

Therefore, get smart with some prior information and buy a cheap acreage for sale with all your dream features intact. Purchase a piece of land for ranching, hunting, recreation, or to build your home as rural lands are always a wise investment.

Financing Land Development: Little Known Secrets

There are alternatives to conventional bank financing for land development deals.

OPM, Others People’s Money

But I know you’ve heard all that before, but there are little known secrets that Major Land Developers have been using for years which I want to share with you.

My clients are absolutely amazed when I share these secrets with them, they always respond “so that’s how they do it.”

So why would a commercial financial broker want to share these secrets with you?

The reason is very simple, at the opening page of this site I told you I wanted to educate you, and so I am.

Also if you’re able to implement some of these strategies, you’re eventually going to need capital to build out your project.

And we’ll be here to help you.
There are three ways in which you can secure your land development deal without closing a conventional loan. The last way you must seek professional accounting and legal assistance, and will not be discussed here.

Work Directly with the Seller

Use Options to Control The Property

Arrange a 1031 Exchange

The above are three methods or ways to get a commitment to sell the property with little or no cash at time of opening an escrow.

Working directly with the Seller

By working directly with the seller you can help the seller solve many of their problems, and in return he becomes your partner in the land development transaction.

Sellers often believe that they can get a better price for their real estate if they carry the paper that evidences the debt themselves. Here are some of the reasons

Buyers may have qualification issues, and if that’s the case you as a buyer may not be as concerned about the interest rate, price and terms and therefore the seller as the one assuming the risk will get a higher price and you get the deal that you were not bank qualified for.

The Seller will get greater after-tax profits.

By the seller carrying paper they will not be taxed on the amount of the sale, but their tax will be based on the installments paid over the years.

In other words a large capital gain may “push” them into a higher tax bracket, but if the sale is spread out over a period of years, the seller may not be pushed into a higher tax bracket.

Use Options to Control the Property

An option is an agreement specifying some future performance in exchange for a benefit.

Simply stated, give some money control the property!

You offer the owner a price for the option to buy the land. That price (the option premium) buys you the right to buy the land at an agreed upon price at a certain time in the future.

You can exercise the option by closing the sale at any time before the expiration date of the option. The seller must sell, when you are ready to buy, no matter how much the market value may have escalated during the holding period.

A more sophisticated approach is to acquire a rolling option for large land development transactions.

This is much more complex then a simple option agreement. Rolling option is utilized when there is a great deal of property that an individual needs to control. We usually see the use of rolling options in large master planned communities, where developers are planning to phase the development project into numerous phases with an absorption of the homes exceeding five years typically.

In a Rolling option the buyer controls the entire tract but only puts up the option for the first portion of the land, after each execution of the options, the buyer is able to take down more land, until the developer controls all the property of the original contract.

If you do not exercise your rolling options ass they come due, the entire contract is cancelled as to future property that is secured through the initial option agreement…and of course the seller retains the entire premium, and he can immediately offer the property to another buyer.

Benefit to the Buyer is that they can now plan an orderly development of the entire acreage, as well as knowing exactly what the land costs for the entire project are for the proforma and any Return on Investment calculations.

Benefit to the Seller is that the seller can get the price he wants for the property, and he knows that at the least he received a sizable option premium, and at the best he receives the price he wants for his land.

How to Sell Your House in a Sluggish Economy Using Seller Financing, Land Contracts Or Lease Options

Using a Lease Option or Land Contract may be the perfect solution to selling your house fast in our sluggish economy. If you’ve tried listing with a realtor, selling your house yourself or considered renting, this might be a refreshing and realistic alternative to getting the job done.

There are plenty of buyers who cannot get qualified for financing right now (the result of our economy). There are also plenty of sellers who can’t get their home sold (also the result of our economy). The solution is to bring the two parties together in a win-win that can benefit both parties.

The problem quite often is that your realtor may be determined to finding a qualified buyer who is able to get financing right now. Or if you are trying to sell your own home without a realtor, you may not have the skill or knowledge to separate the qualified from the unqualified buyer. Even if you feel your situation isn’t what you would consider ‘desperate’ or ‘out of control’, sitting on an empty house just doesn’t make sense. What if you can design an alternative to the issues surrounding your house selling problems? An alternative that would bring you a fair market purchase price, eliminate commissions or fees, bring you debt relief from the mortgage payments while you’re waiting to close on the sale and provide freedom from repairs and maintenance? Would that appeal to you? This leads to what we feel is a very quick, realistic solution to selling your house…selling on a land contract or lease option to buy.

In many cases, a buyer may truly WANT to own a home but their financing or credit will not allow them to purchase outright. This is where some form of temporary seller financing can create a solution that is acceptable to both parties. The two most common types of seller financing known through real estate circles are Lease Options and Land Contracts.

Some people call it Seller Financing or Owner Financing. In some states the structure is more commonly known as a Contract For Deed. Here in Ohio, we call it a Land Contract.
There are also structures known as a Lease Options. Or some people call it a Rent-To-Own program. There are items the two sales strategies have in common and there are distinct differences between the two as well:

What is a Lease Option?
A lease option (also known as a rent-to-own in some areas) is a combination of renting and purchasing. Primarily, It involves a buyer who would need some time before a purchase is possible. This person would rent the property from an owner until they are in a position to purchase the subject property. Secondarily, a lease option serves as a delayed sale with the purchase price being pre-determined upfront prior to the tenant/buyer moving in. Typically, there is a set amount of time that a seller will allow the tenant/buyer to exercise their option to purchase the property…anywhere from 1-5 years.

What is a Land Contract?
In common layman’s terms, a land contract is an installment sale where a buyer agrees to make payments directly to the seller until the purchase price is paid off. This usually involves an interest rate (typically higher than market rates) with the seller acting as the bank. However, the deed (legal ownership) does not transfer to the buyer until the buyer pays off the entire amount due to the seller. Generally, the loan with your buyer will be amortized over 30 years (or whatever term you can negotiate with the buyer) and contain a ‘balloon payment’ which may be due in 2-5 years after the Land Contract is originated. After the balloon payment is paid to the seller (typically by the buyer refinancing with a bank), the seller is then obligated to convey the deed. A land contract is, to a greater extent, a commitment made by the buyer to eventually refinance the property into their name so they can acquire legal ownership. A Land Contract can be used even in cases where you may have an underlying mortgage of your own.

Similarities Found In Lease Options and Land Contracts:

1. In both cases, the seller will usually receive full market value for the home with the purchase price being predetermined at the time the contracts are drawn up. Since the seller is flexible on the terms, they can afford to be firm on the price. This really helps in those situations when a house may contain little to no equity; many times there may not be enough equity to pay a realtor.

2. In both cases, the buyer will be responsible for making a payment directly to the seller.

3. Both agreements contain a maturity date which varies from 1 year up to 5 years, with the normal time frame being 2-3 years. The time frame can be adjusted to fit your needs along with what you feel your buyer may need. This is what allows the buyer the time necessary to cure credit issues, build up down payment money, secure more time on the job, etc.

4. Both agreements require the buyer to maintain responsibility for maintenance and repairs on the property while living in the home… no matter how large or small, the maintenance and repairs are the responsibility of the buyer.

5. Both agreements contain a non-refundable option fee or down payment. This money is yours to keep and non-refundable to the buyer, per your agreement.

Both sales strategies have pro’s, con’s (very few cons), similarities and differences… too many to detail in this short article. There are certain educational components and steps you’ll need to take when it comes to protecting yourself in structuring a Land Contract or Lease Option… the least of which will be the importance of seeking good legal counsel. Seek a real estate attorney how has a thorough grasp of land contracts and/or lease options… there are few that have a working knowledge so it might take some effort on your part.

Here is an excellent question you might want to ask yourself: “Isn’t it better to use a Lease Option or Land Contract to create a future sale than to not sell my house at all?” Kind of like saying a bird in the hand is worth more than two in the bush. In this market, you can find more people who WANT to own (but aren’t currently qualified) than you can find that ARE qualified and just happen to love YOUR home over all the others saturating the market right now. Makes sense doesn’t it?

CONCLUSION: Don’t be caught with your head buried in the sand like a lot of sellers today. Many people think they’re immune to the severe decline that we’ve seen in our recent marketplace. Now they’re not going to come out and actually admit to this thought process. But when they’ve had their property listed for sale for 6-18 months, and they feel they can sell their home for the same price they purchased it for 3 to 4 years ago (and using conventional means, like a realtor and a currently-qualified buyer), they might just be living in la-la land. Here in Ohio, we’ve seen at least a 15% decline in most areas.

If you’ve had your property listed with a realtor for 6-12 months or longer (and we work with sellers who had their properties even listed for two years or longer), now is the time to think outside the box. A lease option or land contract can provide a ‘top of the market’ price for your area at the time you are selling. The old rule of thumb is that if you are flexible on terms, you can be firm with the price. Seller financing, whether it be a Lease Option or Land Contract, should create a win-win for both seller and buyer. This is a selling strategy that works especially well in slow or ‘buyers’ markets’. Keep in mind that in the end both seller and buyer want the same thing… buyers want to own and sellers want to sell. Seller financing is an incredible strategy that has worked well for hundreds of thousands of sellers and buyers alike.

There are many, many more details on how this can work effectively for you and your market. Email us anytime ([email protected]) if you would like a complimentary copy of our report entitled “The Lease Option or Land Contract Solution to Selling Your House FAST in Today’s Sluggish Economy”

The author of this article and president of Butler County Homes, Inc. is Mark Cousino. Mark Cousino has been an active real estate entrepreneur since 1988.

Butler County Homes can assist both buyers and sellers. We have an extensive buyers list that is growing and being updated daily… all of them are buyers who want to quit renting and own a home. Generally the homes we offer to individuals or families that want a home to live in will be drop-dead gorgeous. We have a number of financing possibilities including Lease Options, Land Contracts, Rent-To-Own, etc. When we enter into a lease option, land contract or rent-to-own with you, we are more concerned about your current situation than your past. We believe bad things can happen to good people.

We are also constantly looking for additional properties to add to our inventory. Call us at the number below if you would like us to consider purchasing your property. We can discuss the qualifications of your house through a simple phone call. We are located in Ohio but can work throughout the country.