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Hello Folks,
I'm looking at possibly purchasing some property out in the country. It's just acreage, about 10acres. The terms are as follows:
$4,000 down for $732/mo at 10% for 20yr. This is for an asking price of $79,000. Are these terms generally negotiatable? If so, what is the average figure I should expect to pay? I read in a country/rural book that we can expect about 10-15% lower than the asking price. So, lets say the final asking price could be around 69,000. But, more importantly, 10% seems pretty high especially for only 20 years!
Now, I am 27 years and don't have much credit history,so that's why I'm interested in doing owner financing for this property. It has always been a dream of mine to own property out in the country that I can go to for a weekend getaway, etc. I will then hopefully build a house in the future.
Anything is negotiable. Keep in mind owner financing is generally two points above the interest rate charged by the bank.....after all the seller is taking a risk at financing you.
Anything is negotiable. Keep in mind owner financing is generally two points above the interest rate charged by the bank.....after all the seller is taking a risk at financing you.
Thanks for your reply. I don't understand why the seller is taking a risk at financing me if they own the property. If I can't make the payments, then I believe their contract will say that they can take over the land (after all, it's not really mine until I pay it off completely, right?). So, it seems to be a win-win for them with no possible way to lose. They can take the land away and resell it to someone else and keep my payments, as well. So in a sense, they made money + get to sell it again for full price to someone else.
What am I not understanding here? I don't see how it's a risk for them to charge such high interest rates.
Interest rates on vacant land are typically higher than standard home mortgage rates, and with owner financing they are taking additional risks. Foreclosing on the property if you default is not as simple as you've outlined - they still have legal steps to take to take the property back. Have you chcked to see if you can get your own loan at a bank or through a mortgage broker?
Wendy,
I tried to get a loan for a new car purchase and was declined unless I put my father on as co-signer. so, I'm guessing the mortgage loan will not work. I have above average income and I guess they weren't satisfied with only 2 years of employment history (I am self-employed).
Thanks for your reply. I don't understand why the seller is taking a risk at financing me if they own the property. If I can't make the payments, then I believe their contract will say that they can take over the land (after all, it's not really mine until I pay it off completely, right?). So, it seems to be a win-win for them with no possible way to lose. They can take the land away and resell it to someone else and keep my payments, as well. So in a sense, they made money + get to sell it again for full price to someone else.
What am I not understanding here? I don't see how it's a risk for them to charge such high interest rates.
More of an "I can, so I will" scenario.
Generally if someone is looking for owner financing then they can not get it elsewhere and the seller of the property knows this.
They also generally know that there are not a surplus of owner financed properties out there.
As far as risk goes, they don't know what you are going to do with the property. What if someone bought the property with owner finance and then moved a bunch of old chemical tanks on to the property. Then they decide to cut out. The owner then has to take care of cleaning up the mess.
If it was as "no risk" as you think more people would be doing it.
Generally if someone is looking for owner financing then they can not get it elsewhere and the seller of the property knows this.
They also generally know that there are not a surplus of owner financed properties out there.
As far as risk goes, they don't know what you are going to do with the property. What if someone bought the property with owner finance and then moved a bunch of old chemical tanks on to the property. Then they decide to cut out. The owner then has to take care of cleaning up the mess.
If it was as "no risk" as you think more people would be doing it.
Thanks Mike. I understand what you are saying, but I'm seeing quite a few owner financed properties on the market for the area. Plus, I've checked their contract and it says you can't do a number of things such as placing old chemical tanks on the property. Basically, I still don't see the risk. I guess 10% is just some high number they are hoping I go for. Maybe this is where I need to negotiate if I can put a nice down payment down.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Try a lower interest rate for a shorter period of time that equates to about the same payment. I think you've hung yourself up on a number. I also would question the wisdom of a book that just makes a bold statement about asking/offer prices. If the seller was asking 1 million for the same piece would you pay him 850K? Probably not. Do some research into comparable sales.
I've had people offer more than asking price if they could get better terms. Car dealers do that all the time by focusing on the monthly payment amount rather than on the price of the vehicle or it's terms.
On a lighter side....just did a sale... owner financed, zero down... buyer
agreed to full price (We were prepared to negotiate) and all terms. I am completely blown away. Picking up the signed contract tonight!! 5 more to go and I'll never be a landlord again!!!!!
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