Pros and Cons of Owner Financed Hunting Land
As you browse our hunting property listings, you can expect to find some with owner financing available. Simply put, this means the seller finances the purchase, which is a model that can be beneficial to both parties. The cons to such a deal only occur when someone not suited for self-financing tries to push it through anyway.
For sellers, owner financing is attractive because they can move a property faster in a tight credit market. They also pocket the interest payments that would go to a lender in a conventional mortgage agreement. The closing costs are less, and the deal is done quicker because there is no loan approval process. There are also tax benefits for the seller. Capital gains can be written off against losses and reinvested into other properties.
A buyer can benefit from a seller-financed transaction when banks are stiff on lending. The buyer may be credit worthy in the eyes of a seller, but not to the eyes of a bank. Also, seller loans are free of fees (underwriting, appraisal, origination fees, etc.) that can often total a hefty payment at the time of closing. Finally, if a buyer has poor credit, but can prove he/she can make the payments and does so within the agreement, credit can be restored as long as the seller reports the transaction to a credit agency.
Let one of our trusted land specialists help you navigate the pros and cons of owner financed hunting land.
Take Action to Avoid Risks
An owner-financed mortgage can be structured in a way that satisfies both the buyer and seller. Interest rate, length and incentives of the loan are all negotiable. So, how does someone go about selling or buying a piece of seller-financed hunting land?
Sellers first need to decide if they want their money tied up in real estate. Even though they will get a higher return on investment in the long run, they may want the cash at closing. To offer financing, a seller must do financial credit checks on potential buyers. If they don’t require a squeaky clean credit history like traditional lenders, they are taking a pretty big risk. While the rates and length of the loan may be negotiable, sellers should remain firm on down payments to ensure the buyer has enough cash to make payments, cover any property damages or pay for the costs of foreclosing should that occur.
Buyers should be up front about their credit history and help the owner understand their financial situation. Any surprises that arise during negotiations can destroy trust and often kills the deal. Also, as you are searching a piece of hunting property, reach out to our agents to inquire if the owner would be interested in financing the land purchase. Just because it’s not listed doesn’t mean it’s not an option – especially if the property has been on the market a long time.
Whether you are selling or buying hunting land through owner financing or a more traditional method, be sure to work with our land specialists. We have extensive training, knowledge and experience in such deals. We promise to lead both parties through the process by recommending what precautions to take to limit the risk of both individuals involved. From creatively structuring the deal to helping draft all necessary documents and making sure no detail is overlooked, we will strive to help you make smart investments that benefit your family and cements your financial stability.