Purchasing Raw Land

[Momma2DoubleCuties]

Anyone know details about how it works?  I know unless your building immediately you probably can't get a typical mortgage.  We are looking to buy raw land, most likely financing it.  Then build a yurt or two and down the line build a forever house.  Except I can't find or get any info from someone how it works.  We are in Oregon if that makes any difference.  And thanks!

[kitchensqueen]

Great question! Unfortunately, I don't have any info; just wanted to chime in and say I'm also interested in hearing how this works. We'd love to buy a couple of acres in a few years and build our own tiny house. 

[FarmerBeth]

We looked into this and we were told we had to be approved for a larger amount that would approximate the land plus infrastructure like getting the electricity, sewage and driveway and site preparation done.  We didn't persue it any further so I can't say more.  I'm also Canadian, so it may be different here.

[SweetSilver]

The best thing would be to ask your bank.  It could be that if it had electricity hookups available that they would finance it.  We had no such loan available, but dh's parents did write up a loan agreement.    These days a loan would be a far better place to park your cash than the bank, or even stocks.  So if you have a great relationship (a trusting one, too) with your parents or another family member that could be an attractive option.  Rate tables are available online for free.

[babyfarm]

We bought our land with 100% owner carry so that we would have our cash to build with. But we're in TN, transplanted from Oregon, and I know it's much harder to find those kinds of deals out west. 

[kitchensqueen]

What does "owner carry" mean? 

[babyfarm]

Owner carry/owner financing......the owner is basically the bank.  We didn't have to get a bank loan for the land, we make payments to the property owner instead.

[kitchensqueen]

Okay, I see. How are the interest rates with that? I assume both parties would retain legal counsel and draw up a formal bill of sale and loan terms as well? It seems there could be some significant downsides to that type of arrangement, but considering the state of for-profit banking these days, there could also be some pretty good upsides. 

[babyfarm]

Yes, there is a legal contract.  I don't see a downside.  Bare land loans are hard to get, which this seller knows, and that is why he offers his properties with financing - otherwise he'd probably not be able to sell them (other than to cash buyer's).  Interest rates are based on how much, if any, money you put down.  With zero down the rate is 10%, and it goes down from there with money down.  The length of the loan can be up to 30 years, or shorter, depending on what you want your monthly payment to be.  It was a good option for us, we had the money to buy property OR build a house, but not both.  This got us onto our land with enough money left to build....but....weather and other issues have delayed us, so we're now putting a mobile on the land to live in while we build.

[kitchensqueen]

It seems pretty straightforward... since there's a legal contract, I guess neither party could just change their minds... does the seller have any input on what you can do with the land? There are no restrictions as there might be in a land rental arrangement? What happens if something happens to the seller (for example, passes away and his assets end up in probate or with heirs?). Does your contract over ride any of those types of issues? 

Also, if you go this route for the land, with a bank still give you a mortgage to build a house? Or do you have to have cash on hand to build already?

[babyfarm]

There are land restrictions, though this land is considered "unrestricted" - as far a building codes, need for permits, that sort of stuff.  As far as the owner goes - no commercial pig or poltury farms, no commercial junk yards, limit of two homes per every 5 acres....reasonable stuff like that.  Our "owner" is a businees, so I think we're safe from those types of issues.  I have no idea if a bank would lend to build or not - we're looking to stay out of debt other than the property, so we didn't even check into it.