Selling vacant land doesn’t have to be a difficult process!
Many vacant land sellers have a hard time selling their property because buyers don’t have the money to pay. Getting a mortgage for vacant land is much harder than getting one for a house, reducing the options and leverage that sellers have.
Fortunately, you can use something like a vacant land purchase agreement to make the selling process simpler. This land contract lets you work with more buyers and having more control over the terms of the transaction.
1. Why People Use Land Contracts
Similar to other types of contracts, land contracts provide several benefits. However, land contracts provide benefits to both buyers and sellers, making them the preferred type of seller financing.
One of the problems that many buyers have, especially those that have never bought a house before, is getting approved for a mortgage. Mortgage approval requires a good credit score and proof that a buyer can afford the home.
Those that are interested in real estate but have poor credit history can go with a land contract to purchase a home. This would let them make payments to the seller instead of a bank if they were to get a mortgage.
Unlike a mortgage, the seller doesn’t get all of the money upfront when they sell a house with a land contract. While this can be a downside selling with a land contract, it gives sellers more options when it comes to choosing a buyer.
When you use a land contract, you’ll have more leverage to negotiate a higher purchase value for property. You’re also more likely to get a large down payment because of the risk that’s involved with a land contract.
2. Terms to Know
When it comes to understanding a vacant land purchase agreement, you’ll need to know several basic terms to ensure the process goes smoothly. Most of the information will be straightforward, but it’s best to work with a lawyer to avoid making mistakes.
Here are some of the basics terms to know:
Seller financing is the entire process that revolves around a seller managing the transaction. Instead of having a bank manage the mortgage process, the seller will do it to cut out the middleman. When selling property, you’ll need to make buyers aware of how much you want, the interest rate, and other mortgage terms.
A down payment is required by most sellers because it gives them security and lets them know that a buyer is serious about a transaction. When you accept a down payment, you can go through with the sale.
The closing date is the time in which you sign the deed over to the buyer. This happens when you’ve reached an agreement with the buyer and they’re ready to purchase the home. This happens after they’ve made a down payment and before they move in.
3. What’s Included in a Vacant Land Purchase Agreement
When selling vacant land, you need to include a variety of conditions in your vacant land purchase agreement. This will prevent confusion when it comes to negotiating terms with buyers, and it will make it easier for them to decide whether they want to sign the contract.
Within a land contract, you must outline the financing terms so that buyers are prepared to make payments. You should also include information about things like testing for a septic system if the property doesn’t have access to a public sewer.
Your property must meet compliance with local and state rules and regulations, and it needs to have access to a public road.
Keep in mind that some buyers will request sellers to install new septic systems or provide permits before they purchase the property. However, you won’t need to worry about that if you’re selling rural vacant land.
If your property requires a special type of job, like soils testing, you’ll need to go over who will be responsible for doing it. It’s best to pay for this instead of making the buyer do so because they’ll be more likely to back out.
4. What Happens When a Buyer Doesn’t Make Payments
If a buyer fails to make a payment, you can choose to file what’s known as a land contract forfeiture. This allows the seller to keep all of the money that they’ve received along with the property. However, you’ll miss out on getting the rest of the money so you’ll have to go through the entire process again.
It’s best to avoid filing a forfeiture if the buyer misses a single payment. You can include terms in your purchase agreement about what will happen if they don’t pay on time. In most cases, the buyer will get caught up because they won’t want to lose the property.
Use a Vacant Land Purchase Agreement Today
If you’re trying to sell vacant land, you should use a land contract to get the most out of your property. While the process may take longer than a standard mortgage, you can end up getting more money and leverage.
By using a vacant land purchase agreement, you won’t have to worry about a bank managing everything for you. Instead, you can work directly with the buyer to negotiate and receive payments.
Check out our tips to sell land fast if you don’t want to wait!