How to Buy Owner Financed Land

Image Credit: Chris Clinton/Stockbyte/Getty Images

Buying land through owner financing, or a land contract as it is called in some states, can seem difficult at first, mostly because most people--sellers and buyers alike--don't think of it at first. The benefits to a buyer of owner financing are the ability to buy land even if he has less than perfect credit, the ability to negotiate a smaller down payment and the ability to buy more than one piece of land at a time, which a bank will rarely allow a buyer to do. The benefits to the seller include the ability to sell land even in an economic downturn, an influx of monthly income, the elimination of closing costs and the ability to get a better price overall because the buyer is more likely to pay a higher price for the convenience of owner financing. Also, if the buyer is unable to continue making payments, the seller can keep all of the money paid (including earnest and down payment money) and still retains title to be able to sell it again.

Step 1

Find a piece of property that you want to buy. Be sure that you are prepared to accept it in "as is" condition, since most owner finance deals do not require an inspection. Look for a motivated seller. If the seller of the property you are interested in has not advertised that they are willing to owner finance, ask. It could be that they haven't thought of it. Look, too, for properties that have been on the market for a long time. A seller may be willing to accept something instead of nothing.

Step 2

Bring cash to the table. A seller is much more likely to consider an owner finance deal if you have a substantial amount of cash to offer upfront. If you don't, consider offering to make high monthly payments and working the down payment into the higher monthly.

Step 3

Consult an attorney. While most real estate agents could help you with this transaction, they'll want a commission on the sale and they can't legally, in some states, write up the agreement. An attorney will also be able to help you find out if the title is clear. While owner financing can be great, if you have paid off a piece of property and then in the end discover you can't get title to the property because of liens or encumbrances on it, you will have a lawsuit on your hands.

Step 4

Get an appraisal and title insurance on the property. You may have to pay more, but you will still want an appraisal so that you know what you're getting. Just because you are getting the convenience of owner financing, you don't have to pay more than a property is worth. Title insurance will ensure that

Step 5

Write up the agreement. After you have secured a piece of property and the owner has agreed to owner finance it to you, you'll need to write up your land contract or lease purchase agreement. You will need to come to an agreement on an interest rate and length of contract. Some owners will finance the entire amount for a term of 5 or 10 years, while others will allow you to rent to own for a term of 2-5 years, meaning you will have to come up with a balloon payment of the balance owed at the end of the term.


Just because the property is owner financed, it does not mean that the deed holder has rights to the property. The buyer has the right to possession of the property, full use of it (within the bounds of any covenants or restrictions), exclusion and resale.


In most states, an owner has the right to foreclose the same as a bank, so make timely payments.

references & resources