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by Dan Auito
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You have permission to publish this article electronically or in print, free of charge, as long as the bylines are included. A courtesy copy of your publication would be appreciated - send to: magicbullets@alaska.com
Real Estate: Financial Considerations $$$
Raw land as opposed to improved property is much more difficult to finance through traditional lenders. The main reasons are that it generates very little income, development costs can be expensive, there are no buildings or improvements that can be used as collateral, and it is often considered speculative.
For those reasons mentioned we find that sellers are often our first choice regarding financing. It is typical for a seller of raw land to accept 10 percent down and the rest to be paid over time at a specified (below market) interest rate. This would be an example of an installment land contract. Other forms are contract for deed, mortgage and note and purchase money mortgages. In these cases, a real estate attorney usually drafts these contracts and a bank will act as an escrow agent to facilitate verifiable records of payments received. The seller often retains the deed until the property is paid for in full.
If you want to investigate bank financing, then you may start out by offering 30 percent down with a seven-year mortgage, with the bank getting an extra percentage point over and above the current interest rates for standard loans. This may not be accepted, but it does give you a starting point to see just w |
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