Answers · Owner Financing & Alternatives
How does owner financing work when buying land?
The seller acts as the lender: you negotiate a down payment (commonly 10–20%), an interest rate (typically 7–12%), and a term — then pay the seller monthly instead of a bank. Title transfers either at closing (deed + seller-held deed of trust) or, riskier, only after the final payment (contract for deed).
Two legal structures dominate. In the deed-and-mortgage version, you take title at closing and the seller records a lien — functionally identical to a bank loan, and the version worth agreeing to. In a contract for deed (also called a land contract or installment sale), the seller keeps title while you pay; your interest in the property may not even be recorded. Buyers routinely discover the seller's own mortgage, unpaid taxes, or heirs' claims sitting senior to their payments.
Typical terms in listed owner-finance land deals run shorter than they look: a 30-year amortization with a 5-year balloon means the real question is what refinances you in year five. Many buyers who "bought" with $199 down discover at balloon time that no lender will touch the deal — because the parcel was overpriced against comparables from the start, and the seller's pricing absorbed the easy terms.
Do the minimum diligence a lender would have done for you: a title search (roughly $200–$400), a recorded deed of trust, an amortization schedule in writing, and a check of county records for the seller's own liens. Skipping the appraisal is the discount owner financing offers; it's also how overpaying happens.
The Turnrow angle
We regularly refinance borrowers out of seller carries — the appraisal we order is often the first independent valuation the property has ever had.
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