Created on Saturday, March 07, 2015
Updated on Monday, February 26, 2018
by Land Century
Land for sale by owner is the most cost effective way to buy land. Its faster, cheaper and less of a hassle when an owner sells land directly. Lets find out why.
Land From Owners is Cheaper
[caption id="attachment_23775" align="aligncenter" width="600"] Source: forsalebyowner.com[/caption]
A basic comparison done for the housing market is giving us a rough estimate of the percentage ratio, which could be also considered applicable for land properties.
Theres a lot of overhead when an owner hires a realtor to sell their property. While the buyer may not have to deal with these costs directly, they will notice that prices are always higher when the seller is using a realtor. Why?
- Realtors charge a premium.
- Theres more red tape when using a realtor.
- The seller wants to recoup lost money.
If the owner were to sell a property for $10,000 but they know the realtor will take a portion of this price, they will often bump the price higher to cover the costs. Dealing directly with owners who want to sell their land means youll cut out the middleman, saving both you and the owner money in the process.
Purchasing Options Expand
Possibly the biggest advantage of FSBO land is that purchasing is easier. You wouldnt dream of buying a home without going to the bank. Large investments need some kind of backing, and buying a house is simply out of most peoples budget without a loan. Owners that sell homes also wont take small payments every month the same way that land sellers will.
Many people that sell land will provide financing so that buyers have a hassle-free opportunity to buy land.
With this purchasing option, youll:
- Not have to deal with high interest rates.
- Need a lower down payment, if any.
- Avoid stringent credit and work histories.
Owners will want to know that you can pay them every month, so you will likely have to provide a credit check and some financial history, but less than a bank would require.
However, you also have the option of paying the owner in cash. If you have cash to buy property, youll find that you have a lot of negotiating power. Owners dont want to deal with banks or financing if they dont have to. Cash is king, and if you have it, use it to your advantage. Its also much easier to talk directly with an owner to hash out a deal than it is if youre using a real estate agent.
Did you know that getting a loan for land is difficult? When you buy a home, lenders know that if you stop payment, they can reclaim the house and sell it for a profit. When you buy undeveloped land, the price increases much slower. This means that the lender is taking a big risk. In fact, most traditional lenders will not provide a loan for raw land.
Get the Deal Done Faster
Many homes take 45 60 days or more to close. This means that the buyer really doesnt own the home until this period has expired. Obviously, closing on land is still different. When an owner is selling directly, youll be able to own the property quickly and easily. Owners that sell directly will often sign all of the paperwork in an afternoon and finalize the deal. If you want to get the deal done fast, its best to work directly with the owner and cut out the middleman.
With this said, its also important to have legal guidance. You want to ensure that you dont have to pay back taxes that were neglected, or find out that you really dont own the land. There are many sellers that are looking to scam buyers, so you must always do your due diligence before handing over any money no matter how nice the seller is.
Less Money Paid Over Time
If youre able to either pay for the property outright or work out a deal with an owner to finance the property, youll pay much less money. Why? When you go through a traditional lender, youll be charged higher interest fees.
Lets look at a prime example based off of current rates. Taking out a 30 year loan on just $10,000, you would:
- Pay nearly $22,000 in total
- Pay just under $60 a month
- Pay over $8,200 in interest
Keep in mind, this includes a 12% down payment. Yes, owners will expect payments to be made faster and loans for land are always shorter, but its a major savings. Especially considering the gradually increasing land prices and the growth projections as well:
More Land Opportunities
When you buy owner land, these are properties that never make it into the local real estate industry. You wont find this land advertised as well as other properties. Oftentimes, youll have to use very specific agencies to find this land. You may even come across potential foreclosure land that the owner wants to get rid of to satisfy their debts.
Most of the best land opportunities do not make it into your local papers or real estate office. This opens up a wider purchasing option to you so that you dont need to deal with just the listings your agent has. Land is a valuable asset and one that people are starting to invest in heavily. When buying land, its often best to weigh all of your options. Its not as easy as saying that a property has 10 acres, so its a steal. You need to consider the property type, condition and location. All of these are very important when buying any land.
Once you find the perfect locale, you can start to look for land opportunities. Act quickly, because when a good piece of land is being sold directly by the owner, it will be off of the market fast.