Mountain Land Land Rush OnLine

Buy a tract of mountain land and there are three ways you might choose to pay for the property – cash, bank loan, or owner financing. Let’s take a look.

First, cash is an alternative – obviously. Although buyers have historically borrowed from some source to pay for land, more recent transactions reflect a great increase in cash purchases. It appears that many buyers now feel their cash resources are more profitably invested in land than in the stock market. Tired of being pummeled by stock losses or squeezing out 1-2% returns on their CDs, land buyers want their money placed into a solid investment they can see, feel, touch, and enjoy.

Buyers may also choose to borrow from a traditional lender – a bank. Because unimproved land carries some amount of risk to the bank, these lenders usually require about 30% down with the balance payable over no more than 10-15 years. Current rates seem to be in the 6-8% range depending on the lender.

Bank loans also carry with them certain expenses. The lender may charge for an appraisal, credit report, a loan origination fee (about 1% of the loan amount), plus closing costs such as title search, title insurance, and recording fees. The lender may also require a survey – always a good idea anyway.

Banks usually require a financial statement, employment verification, and debt information to determine the buyer’s ability to repay the loan. In other words, when borrowing from a bank, you must “qualify” under their terms.

Finally, you may choose to ask the seller to be the bank. Instead of borrowing money from the bank, thereby providing the seller with cash payment for the property, you simply ask the seller to do the financing. Here’s how that might work:

Let’s say you want to purchase a $200,000 property. You have about $50,000 in cash to invest as a downpayment, leaving $150,000 unpaid. You can make your purchase offer based on the seller financing the $150,000 over some reasonable length of time, secured by a note and deed of trust (just like the bank would do).

Keep in mind that sellers who are willing to finance do not want to wait 20 years to receive their money. They agree to finance in order to make your purchase decision easier. They don’t require all the background checks like a bank, nor do they charge all the fees you will encounter with a bank. In fact, seller financing is very simple. You simply say, “Will you do thus and such?” and they reply, “Yes.” (or occasionally “No.”).

The most likely format for such financing might go like this: You offer to pay $50,000 down with the balance of $150,000 payable based on a 10, 15, or even 20 year amortization schedule at some acceptable rate of interest. You also include the stipulation that a “balloon” payment will be made at the end of 5-7 years. This means that although the payments are structured as though it were a 10,15, or 20-year loan, in fact the entire remaining balance is due and payable at the end of the 5-7 year period.

Now, before you panic, consider the benefits. You are able to buy land now, with payments spread out over a long period of time. You have no extraneous costs, no qualifying, no unreasonable paperwork. At some time within the 5-7 year period, you’re going to decide exactly what you will do with the property, i.e. build a home or cabin. When you do, chances are you will get bank financing at that time and pay off the seller’s note anyway. In effect, this type of financing allows you to purchase the property you want, have reasonably economical payments, and have 5-7 years to make other plans.

To the seller, this type of arrangement accomplishes three benefits. First, the property is sold. Second, receiving payments over time may spread the seller’s tax liability. Finally, the sellers know they will receive all their money from the sale in a reasonably short period of time.

Although not all sellers are willing or able to finance their property, many will. Our company encourages seller financing, and many of our property owners agree to do so. If financing is important to your land purchase, tell us. We’ll do everything possible to structure a purchase to meet your requirements.

Call 800-849-9225 or Email Paul at paulchristian@ncmountainland.net and we will help you locate a property that fits your price requirements, and explain available financing sources. Or visit our office for a “virtual tour” of all our properties. Large land tracts – over 50 acres – are our only business!

The purpose of Land Rush is to educate and inform you in such a way that, once you arrive here in the mountains, you'll be prepared to make your purchase. If you haven't already, please – before you come - take time to download our buyer's guide – “Carolina Dreaming” - from our website. It's short, easy to read, and will provide you with the basic information needed to make your trip a roaring success. For your free copy, go to: