My wife Julia ran across a post on craigslist.org for a piece of land out on the northern California coast. The seller is offering to carry $200,000 of the purchase price with a $60,000 down payment to give the buyer time to build and refinance.
“Ocean view building site, owner will carry – $260,000. With a $60,000 down payment, owner will finance this ocean view lot for a year or until your home has been built, whichever comes first. No monthly payments, zero interest added on to the principle…can’t get better than that! $60,000…lot is yours – just get your plans and build. Great opportunity for investors and contractors.”
If you’ve never looked for land before you may not know it’s really had to get loans on bare land. In fact there are few lenders willing to do it. When a seller offers to carry the loan and put you on the title you instantly get the most important part of getting a construction loan, the land. Other requirements are plans, a contractor, soil drainage tests, but the land is the first piece of the equation and often the hardest to get your foot in the door if you don’t have cash to buy the land. This one piece is the biggest impediment to building your own house.
In this example the seller has done a lot of the leg work, making it easier for a buyer to get approved for a construction loan. This is a huge benefit for the seller because it opens the land up to a wider group of buyers. The risk is relatively low especially if the seller stays on the title as a lien holder. If the buyer defaults on repaying the full purchase price the seller takes the land back.
If you’re looking for land don’t forget to ask the seller if they might be willing to carry the loan. But be sure to talk to a lender, contractor and real estate expert before entering into any deal like this. There is risk and these experts should be able to help you decide the best way to handle your specific situation. Photo credit Google Maps.