If you’re thinking about buying land and you’re exploring your financing options right now, there’s a good chance you’re deciding whether you should go through bank financing or owner financing. There’s already a lot written about bank financing, so this blog post is meant to give you the other side of the coin, to talk about why owner financing makes sense and how we can help.
You’re probably familiar with bank financing – that’s when a bank (or other lender) gives you a loan so you can make a larger purchase, such as a large piece of raw land. The bank pays the seller the full amount of the property, and then you pay the bank back over a period of several years until you own the land free and clear.
But it’s not the only way to buy land, there’s also seller financing (also called “owner financing”). That’s when the sellers agrees to not to take the full purchase price right away but instead takes the money over a period of years. In effect, they are acting like a bank, accepting partial payment over time until you’ve paid off what you owe.
So you might be wondering, “Why owner financing makes sense for buying land?”
Here’s our answer…
3 Reasons Why You Should Consider Owner Financing
First, it can allow buyers to potentially own a bigger piece of land. Owner financing can sometimes be useful if a buyer does not have the lump sum payment required for a bigger parcel. However, with owner financing, a buyer may be able to make a decent-sized down payment on a big, desired property, then work with the seller to arrange affordable monthly payments to cover the remaining balance.
Second, it provides flexibility to both the buyer and the seller. A bank uses fairly traditional terms: You’ll pay so much money as a down payment, then the rest paid back over time – either as a fixed rate or variable rate mortgage. But a seller and a buyer may find different terms that they agree to that aren’t as rigid. In fact, some agreements can become very creative and flexible for both parties.
Third, it can be a win for the seller, too. A seller wants to sell their land, so offering owner financing gives them access to more buyers who might not typically be able to buy. By offering seller financing, they increase the number of potential buyers who would even look at the property. They may even prefer the cash flow that owner financing gives them.
Owner financing is a great tool for both sellers and buyers. If you’re thinking about buying a piece of land in Arizona, owner financing can be a great option for you.