Buying a Vacant Lot without having to go to the Bank

These days, with the economy as it is, getting a lot loan from a bank is a lot (no pun intended) more of a challenge than it was only a couple of years ago. In 2007, for example, a person with decent income, credit score and 20% down could get a lot loan from most any local lender pretty easily. Today, you can get a loan, but it’s going to require you to put down 50% on up and it’s going to be a struggle to still get a loan. Banks these days really don’t want to finance vacant land. In other words, getting a lot loan is not very realistic. If you’ve got the cash, you can buy.

This lending situation is the #1 reason why lot sales in Ocean Shores have taken a dive. 322 lots sold in Ocean Shores in 2007. 189 sold in 2008. 169 sold in 2012. This is not good news for land sellers at the beach.

One option for sellers to consider, however, is financing the sale of your lot. Not only will you get the sale – you’ll also get the interest. In most cases, this interest can add up to some serious coinage. Let’s switch up and pretend you’re a buyer.

Imagine being able to buy the spot of your dreams right away – a chunk of land overlooking the Pacific Ocean, a home site on Duck Lake or the Bell Canals with your dock in the backyard and the roar of the waves in the background, or even a quiet spot on the bay side of town with tall evergreens surrounding your perimeter. Sound good? What? The bank wants $15,000 down to finance a $30,000 lot? That’s crazy! Not many people are sitting with $15,000 in their bank account these days to put down a beach lot. Two years ago, $6,000 was enough money down to buy that lot.

Let’s say this is you. What are you going to do? I’ll tell you. Call or email me and say “Jeff, we’re looking to buy a lot in Ocean Shores and we need to find a lot where the seller is offering Seller Financing.” Shortly after, you’ll receive an email from me with such a list.

Back to the seller: You can be on this list and you can greatly increase your chances of getting your lot sold much quicker if you offer Seller Financing. Also known as a seller contract, real estate contract, seller carry-back, deed of trust, land contract and so on, it’s a simple way for buyers to buy property and it’s been around for a long, long time. All the normal channels of going through an escrow company, securing title insurance, paying real estate tax and real estate fees still apply, the only difference is the lender.

With seller financing, you’ll be able to buy a beach lot without the bother of having to get a bank loan or borrowing against your home. Basically, the land seller is your bank.

The advantages: No loan fees, no high interest rates, no points or discounts to pay, no appraisal fees, no extra title insurance costs, no 4 page loan applications, no lender or underwriter delays, no prepayment penalties, no bank fees/closing costs, no hassle – just pick out your lot and get it closed a lot quicker than you’d expect. In some cases, I’ve seen lots close within a week. With a lender, it could take months!

The disadvantages: I’m still searching. Let me know if you find one.

How does a Seller Contract work? Easy, it’s just like getting a loan from a bank, only a lot less complicated and the loan doesn’t show up on your credit record either. Pay a small down payment – generally about 15 to 20 percent of the total price and make monthly payments to the seller, often at a below-market interest rate (interest rates for land loans are much higher than home loans). When the seller is paid off, you receive full ownership and a clear deed.

Not all of the lots in Ocean Shores are available to buy with seller financing, but there’s still quite a few that are and I can always assist you in finding those and the best buys at the beach.

If you have any questions about real estate in the greater Ocean Shores area, contact Jeff Daniel at 360.581.9020. Thank you.