How to Sell Land with Owner Financing: Complete Guide to Selling Your Property Faster
- Eric Scharaga
- 4 days ago
- 15 min read
By Eric Scharaga | Updated December 2025 | 15 min read
If you've tried selling vacant land for cash, you know the frustration. Properties sit listed for 12-18 months with few showings and lowball offers. Meanwhile, you're paying property taxes on land that's not producing income.
There's a better way: owner financing (also called seller financing). By offering owner financing, you can sell your land 2-3x faster, attract 10x more qualified buyers, and often get your full asking price.
In this comprehensive guide, I'll walk you through exactly how to sell land with owner financing, including the terms to offer, how to screen buyers, what documents you need, how to protect yourself, and how to get most of your cash immediately at closing while still offering financing.
After purchasing over 150 land notes and helping hundreds of sellers successfully use owner financing, I've seen what works and what doesn't. This guide will show you the proven strategies that work.
What is Owner Financing for Land?
Owner financing (also called seller financing or seller carryback) means you act as the bank. Instead of requiring the buyer to pay 100% cash at closing, you:
Receive a down payment (typically 20% of sale price)
Finance the remaining balance
Buyer makes monthly payments to you over time (typically 8-10 years)
Property serves as collateral (you hold the lien)
Simple Example:
Traditional Cash Sale:
List land for $100,000
Wait 12-18 months
Get lowball offers of $70,000-80,000
Finally accept $75,000 cash
Net: $75,000 after long wait
Owner Financing Sale:
List same land for $100,000 "Owner Will Finance"
Get offers within 60-90 days
Accept full price: $100,000
Receive $20,000 down payment
Finance $80,000 at 10% for 8 years
Buyer pays $971/month
Net: $20,000 now + $93,216 over 8 years = $113,216 total
You made $38,216 more and sold 10x faster.
But wait - there's an even better option. You can sell that $80,000 note at closing for approximately $64,000 (80% of balance), giving you $84,000 total at closing. You get most of your cash immediately, sell at full price, sell quickly, and eliminate all risk.
This is the strategy I'll focus on in this guide.
Why Offer Owner Financing? The Benefits
Before we dive into how to do it, let's understand why owner financing is so powerful:
Benefit #1: Sell 2-3x Faster
Properties with "Owner Will Finance" in the listing sell dramatically faster:
Cash Only Listings:
Average time on market: 12-18 months
Showings: 1-3 over entire listing period
Qualified buyers: Maybe 1-2
Often sit and expire
Owner Financing Listings:
Average time on market: 3-6 months
Showings: 10-20+ interested buyers
Qualified buyers: 5-10
Usually sell within first 90 days
Why? You're marketing to 10x more potential buyers. Most people don't have $100,000 cash sitting around, but many can afford $20,000 down and $971/month.
Benefit #2: Get Full Asking Price (or More)
With cash sales, buyers demand discounts:
"I'm paying cash, I expect 20% off"
"The land needs work, I'll give you 70%"
"It's been on market a while, how about 60%?"
With owner financing, buyers happily pay full price because:
They can actually afford it with payments
They're grateful you're offering financing
The monthly payment feels manageable
They're competing with other buyers
You can often list 10-15% higher when offering owner financing and still sell faster than cash listings.
Benefit #3: Earn Interest Income
If you hold the note, you earn substantial interest:
Example:
$80,000 financed at 10% for 8 years
Total payments: $93,216
Interest earned: $13,216
That's a 16.5% return on the financed amount - much better than most investments.
Benefit #4: Tax Advantages
Owner financing allows you to spread capital gains over multiple years:
Lower annual tax burden (stay in lower bracket)
Installment sale treatment
Defer taxes while collecting income
Interest income in addition to principal recovery
Consult your tax advisor, but this can save thousands in taxes.
Benefit #5: Passive Income Stream
Holding the note creates monthly passive income:
Predictable monthly payments
No management (unlike rental property)
Secured by real asset
Can last 8-10 years
Many retirees love land notes for steady income.
Benefit #6: Get Cash Now, Eliminate Risk
Here's the best part: You don't have to hold the note for 8 years.
You can sell the note at closing to a note buyer (like Damen Capital) for approximately 80% of the balance. Using our example:
$20,000 down payment
$80,000 note sold for $64,000 (80%)
Total cash at closing: $84,000
Sold in 90 days instead of 18 months
No default risk
No servicing hassle
No waiting for payments
You get 84% of full asking price in 3 months versus 75% of asking price in 18 months. Easy choice.
What Terms Should You Offer?
The right terms make your property attractive to buyers while protecting you and making your note valuable to potential note buyers.
Recommended Terms (Proven to Work Best):
Down Payment: 20%
Sweet spot for most buyers
Enough skin in the game to prevent default
Low enough to attract many buyers
Higher down payment if credit score is lower
Interest Rate: 9.9-10.9%
Competitive for land financing
Attractive to note buyers
Fair to buyers who can't get bank financing
Ensures note has good value
Term: 8-10 years
Keeps payments affordable
Not too long (15+ years harder to sell note)
Amortizing (not balloon payment)
Standard in the industry
Monthly Payments: Principal + Interest
Fully amortizing (pays off at end)
No balloon payment
Predictable for buyer
Standard loan structure
Example with Recommended Terms:
Sale Price: $100,000 Down Payment: $20,000 (20%) Amount Financed: $80,000 Interest Rate: 10.9% Term: 8 years (96 months) Monthly Payment: $1,086 Total Paid by Buyer: $20,000 + $104,256 = $124,256
If you hold the note: You collect $124,256 total If you sell the note at closing: You receive approximately $84,000 immediately
Adjusting Terms Based on Buyer Credit:
Not all buyers qualify for 20% down. Here's how to adjust:
Excellent Credit (690+):
Down payment: 20%
Interest rate: 9.9-10.9%
Full terms approved
Good Credit (630-689):
Down payment: 30%
Interest rate: 10.9%
Slightly more conservative
Fair Credit (601-629):
Down payment: 40%
Interest rate: 10.9-11.9%
Higher down payment reduces risk
Poor Credit (Below 600):
Down payment: 50%
OR require co-signer
OR decline and wait for better buyer
These tiers protect you from default while still being fair to buyers.
How to Screen Buyers for Owner Financing
Just because you're offering financing doesn't mean you accept any buyer. Proper screening is critical.
Step 1: Pre-Qualify Buyers Before Showing
Ask these questions before spending time with buyers:
Question 1: "How much can you put down?"
Want to hear: 20% or more of asking price
Red flag: "Can I do 5%?" or "Let's negotiate that"
Question 2: "What's your approximate credit score?"
Want to hear: 630+
Red flag: "Not sure" or "It's improving" (usually means low)
Question 3: "What's your intended use for the property?"
Want to hear: Build home, investment, recreational, keep in family
Red flag: Vague or evasive answers
Question 4: "Have you ever had a property foreclosed?"
Want to hear: "No"
Red flag: "Yes" or long explanations
Question 5: "Can you provide proof of income or assets?"
Want to hear: "Yes, I can show tax returns/bank statements"
Red flag: "I work for myself and don't have documentation"
These 5 questions eliminate 90% of unqualified buyers in 5 minutes.
Step 2: Pull Credit Report
For serious buyers, pull a credit report:
Credit Check Services:
CreditKarma (less accurate)
Through your title company
Credit reporting services
What to Look For:
Credit score: 630+ preferred
Payment history: Look for late payments on auto loans, mortgages, credit cards
Collections: Medical okay, but credit card/loan defaults are red flags
Bankruptcies: How long ago? What caused it?
Current debt: Are they overleveraged?
Cost: $30-50 per applicant (buyer typically pays)
Step 3: Verify Income
Request documentation:
Pay stubs (last 2-3 months)
Tax returns (last 2 years for self-employed)
Bank statements (showing reserves)
Employment letter
Debt-to-Income Ratio: Calculate monthly payment ÷ monthly income
Example:
Monthly payment: $1,086
Monthly income: $5,000
DTI: 21.7%
Good: Below 30% Acceptable: 30-40% Risky: Above 40%
Step 4: Check References
Ask for:
Current landlord (if renting)
Previous landlord
Employer
Personal references (2-3)
What to Ask Landlords:
"Did they pay rent on time?"
"Any property damage?"
"Would you rent to them again?"
What to Ask Employer:
"How long have they worked there?"
"Is employment stable?"
"Can you verify income?"
Step 5: Property Visit
Serious buyers will want to see the property. During the visit:
Assess their seriousness (did they research the area?)
Explain any property issues honestly
Discuss their plans
Answer questions
Gauge their commitment level
Red Flags to Watch For:
Automatic Disqualifiers:
Credit score below 580
Recent bankruptcy (within 2 years)
Current property foreclosure
Cannot verify income
Criminal history involving fraud/theft
Multiple foreclosures in past
Serious Concerns (Investigate Further):
Credit score 580-629
Bankruptcy 2-5 years ago
Several late payments in past 12 months
DTI above 40%
Job instability (multiple jobs in short time)
Evasive about financial questions
The bottom line: If something feels off, trust your gut. Wait for a better buyer.
Documents You Need for Owner Financing
Proper documentation protects both you and the buyer. Don't take shortcuts here.
Required Legal Documents:
Promissory Note This is the IOU - the buyer's promise to pay.
Must include:
Loan amount
Interest rate
Payment amount
Due date of payments
Maturity date (final payoff)
Late payment penalties
Default provisions
Prepayment terms
Borrower and lender information
Deed of Trust or Mortgage This creates the lien on the property.
Key provisions:
Legal property description
Lien priority (first position)
Borrower obligations (taxes, insurance)
Default remedies
Foreclosure rights
Due-on-sale clause
Disclosure of Owner Financing Required in many states.
Includes:
Loan terms summary
Buyer's right to prepay
Seller's rights if buyer defaults
Credit reporting information
Acknowledgment signatures
Settlement Statement (HUD-1 or Closing Disclosure) Shows how money was distributed.
Details:
Purchase price
Down payment
Amount financed
Closing costs
Who paid what
Prorations (taxes, etc.)
Property Disclosure Statement Required in most states.
Disclose:
Known defects
Environmental issues
Access issues
Zoning restrictions
Easements
Any material facts
Optional But Recommended:
Escrow Agreement For property taxes and insurance.
Buyer pays monthly into escrow account, you ensure taxes/insurance paid.
Performance Deed (Some States) Buyer receives deed upon final payment.
Title Insurance Policy Protects both parties from title defects.
Where to Get Documents:
Option 1: Real Estate Attorney
Cost: $1,000-2,500
Benefit: Customized, state-specific, legal protection
Best for: First time or complex deals
Option 2: Title Company
Cost: $500-1,500 (included in closing costs)
Benefit: Experienced, standard forms
Best for: Straightforward transactions
Option 3: Online Legal Forms
Cost: $100-300
Benefit: Cheap and fast
Risk: Generic, may miss state-specific requirements
Best for: Very experienced sellers only
Option 4: Note Buyer Provides Documents If selling note at closing, the note buyer often provides all documents at no cost.
Damen Capital provides:
Professional promissory note
Deed of trust
All required disclosures
Closing coordination
No cost to seller
Recommendation: Use real estate attorney for first deal, title company for subsequent deals, or work with note buyer who provides everything.
The Process: Step-by-Step
Here's exactly how an owner-financed land sale works:
Step 1: Prepare Your Property (Before Listing)
Clean up the land (remove trash, clear brush if needed)
Mark boundaries clearly
Ensure access is obvious
Take great photos
Gather all property information
Verify legal description
Check for any title issues
Confirm zoning
Timeline: 1-2 weeks
Step 2: Determine Your Terms
Decide:
Asking price (can be 10-15% higher with financing)
Down payment requirement (20% recommended)
Interest rate (9.9-10.9%)
Term (8-10 years)
Monthly payment amount
Use online calculator to determine payment.
Timeline: 1 day
Step 3: List Property with "Owner Will Finance"
List everywhere:
Facebook Marketplace (put "OWNER FINANCING" in title)
Craigslist
Zillow/Realtor.com (if offered)
Local classifieds
Signs on property
Land investor Facebook groups
Word of mouth
Your listing should emphasize:
"OWNER WILL FINANCE"
Down payment amount
Monthly payment amount
Property features
Great photos
Contact information
Example Ad: "10 Acres - OWNER FINANCING AVAILABLE $100,000 - Only $20K Down, $971/Month Beautiful wooded acreage, great hunting, power available Flexible terms, fast closing Call [number]"
Timeline: List immediately
Step 4: Screen Inquiries
As calls come in:
Ask the 5 qualifying questions
Eliminate unqualified buyers quickly
Schedule showings for qualified buyers only
Don't waste time with tire-kickers
Timeline: Ongoing (expect 10-20 inquiries)
Step 5: Show Property to Qualified Buyers
For serious buyers:
Meet at property
Walk boundaries
Answer questions honestly
Explain terms
Discuss their plans
Gauge seriousness
Timeline: 1-3 showings usually result in offer
Step 6: Accept Offer
Once you have a qualified buyer:
Negotiate final terms if needed
Get earnest money deposit ($500-1,000)
Sign purchase agreement
Set closing date (30-45 days typical)
Timeline: 1 day to accept and execute contract
Step 7: Buyer Due Diligence
Buyer conducts inspection period:
Property survey (if needed)
Soil test (if building)
Title search
Property inspection
Zoning verification
You provide:
Any requested documents
Access to property
Answer questions
Timeline: 15-30 days
Step 8: Prepare for Closing
Work with title company or attorney:
Order title work
Prepare loan documents
Calculate prorations
Arrange for signing
Coordinate with note buyer (if selling note)
Timeline: 15-30 days
Step 9: Closing
At closing:
Both parties sign documents
Buyer provides down payment
Promissory note is executed
Deed of trust is recorded
Title transfers to buyer (subject to lien)
You receive down payment
If selling note: You receive note purchase proceeds immediately
Timeline: 1-2 hours for closing appointment
Step 10A: If Holding the Note
After closing:
Set up payment collection
Track payments monthly
Ensure buyer maintains insurance
Monitor property tax payments
Handle any issues
Service the note for 8-10 years
OR
Step 10B: If Selling the Note at Closing (Recommended)
After closing:
Note buyer takes over servicing
You walk away with cash
No further involvement
No risk
Transaction complete
Timeline: Same day as closing
Total Timeline from List to Cash:
Traditional cash sale: 12-18 months (maybe)
Owner financing: 60-120 days typically
How to Protect Yourself
Owner financing has risks. Here's how to minimize them:
Protection #1: Require Adequate Down Payment
20% minimum for good credit buyers. This ensures:
Buyer has skin in the game
Less likely to default
You have equity cushion
Easier to resell if needed
Never accept less than 10% down regardless of credit.
Protection #2: Properly Screen Buyers
Follow the screening process above religiously:
Credit check
Income verification
Reference checks
Background check if warranted
One bad buyer costs more than missing one good buyer.
Protection #3: Use Professional Documents
Never use handwritten agreements or downloaded forms without legal review. State-specific documents prepared by attorney or title company protect you if things go wrong.
Protection #4: Record the Deed of Trust/Mortgage
File the lien with the county recorder immediately. This:
Protects your interest publicly
Prevents buyer from selling without paying you
Establishes your priority
Creates public record
Protection #5: Require Property Insurance
Make buyer maintain insurance with you as:
Named as lienholder
Listed as loss payee
Proof required annually
If property burns down or is damaged, insurance pays off your note.
Protection #6: Escrow Property Taxes
Consider escrowing property taxes:
Buyer pays monthly tax amount
You ensure taxes paid on time
Prevents tax lien (which has priority over your lien)
Protection #7: Include Strong Default Provisions
Your note should specify:
When payment is considered late
Late payment penalties
Default triggers
Acceleration clause (full balance due on default)
Foreclosure rights
Attorney fees if you must foreclose
Protection #8: Monitor the Property
Periodically:
Drive by the property
Verify taxes are current
Confirm insurance is active
Check for waste or damage
Don't wait until buyer stops paying to discover problems.
Protection #9: Best Protection - Sell the Note at Closing
The ultimate protection: Sell the note immediately at closing.
Benefits:
Eliminate default risk entirely
No servicing hassle
Immediate cash
No foreclosure worries
Transaction complete
You trade approximately 15-20% of the note value for complete peace of mind and immediate liquidity.
What If the Buyer Defaults?
Despite best efforts, sometimes buyers default. Here's what happens:
Step 1: Late Payment
When payment is missed:
Contact buyer immediately
Determine cause (temporary hardship vs. inability to pay)
Work out solution if appropriate
Document everything
Step 2: Notice of Default
If not resolved (typically after 30-90 days):
Send formal notice of default
Demand payment of arrears
State intention to foreclose if not cured
Give cure period (15-30 days typical)
Step 3: Foreclosure
If still not cured:
Hire foreclosure attorney
File foreclosure action
Go through state-specific process
Property sold at auction
Judicial Foreclosure States (longer, 6-18 months):
Court supervised
More expensive ($3,000-10,000+)
More protection for borrower
Examples: Florida, Illinois, New York
Non-Judicial Foreclosure States (faster, 2-6 months):
No court involvement
Less expensive ($1,500-3,000)
Faster process
Examples: Texas, Arizona, California
Step 4: Property Recovery
After foreclosure:
You may get property back
Must resell property
May not recover full amount owed
Lost time and money
This is why selling the note at closing is attractive - you avoid this entire scenario.
How to Sell Your Note at Closing
The best of both worlds: Offer owner financing to sell quickly at full price, then immediately sell the note for cash.
How It Works:
Step 1: List with Owner Financing
List property with owner financing terms as described above.
Step 2: Contact Note Buyer Before Closing
While buyer is in due diligence, contact note buyer:
Provide property details
Share purchase agreement
Get indicative quote on note purchase
At Damen Capital:
We provide quote within 24 hours
Typically pay 80% of note balance
Close simultaneously with your buyer
Cover all additional costs
Step 3: Buyer Due Diligence Happens Concurrently
While your buyer inspects property, note buyer conducts their due diligence:
Property valuation
Buyer credit check
Title review
Verification of terms
Timeline: Same 15-30 days as buyer due diligence
Step 4: Note Buyer Prepares Documents
Note buyer provides all loan documents:
Professional promissory note
Deed of trust
Disclosures
Settlement statements
You don't pay attorney fees - note buyer covers these costs.
Step 5: Triple Closing
At closing, three things happen:
Your buyer pays down payment
Your buyer signs promissory note
Note buyer purchases the note from you
Money flows:
Buyer → Title Company (down payment)
Note Buyer → Title Company (note purchase price)
Title Company → You (down payment + note purchase proceeds)
Result: You walk out with approximately 84% of asking price in cash.
Example Numbers:
Sale Price: $100,000 Down Payment: $20,000 (buyer pays you) Note Created: $80,000 Note Sale: $64,000 (note buyer pays you) Your Total: $84,000 cash at closing
Compared to: Cash sale after 18 months: $75,000 Owner financing held 8 years: $113,216 (over time, with risk)
You get $84,000 immediately with no risk or hassle.
Benefits of Selling Note at Closing:
Immediate Cash
84% of asking price in days, not years
Deploy capital elsewhere
No waiting for monthly payments
Zero Risk
No default worries
No foreclosure possibility
No bad tenants (common with buyer defaults)
Transaction complete
No Servicing
No payment tracking
No buyer communication
No tax monitoring
No insurance verification
Completely hands-off
Simplified Taxes
One-time capital gain
No ongoing income tracking
Clean tax reporting
Peace of Mind
Transaction complete
Cash in bank
Move on to next investment
Who Buys Land Notes?
Several types of note buyers exist:
Institutional Note Buyers
Large companies
Strict formulas
Often lowest prices
High volume
Private Investors
Individuals
Variable pricing
Relationship-based
Can be inconsistent
Specialized Land Note Buyers (Like Damen Capital)
Focus on vacant land specifically
Understand land as asset class
Fair, competitive pricing
Fast, professional process
What Note Buyers Look For:
Strong Buyer Credit
630+ credit score
Clean payment history
Verified income
Adequate Down Payment
20%+ preferred
Shows buyer commitment
Good Interest Rate
9-12% range
Makes note valuable investment
Marketable Property
Decent location
Legal access
Buildable/usable
Reasonable value
Clear Title
No liens or encumbrances
Good title insurance
These factors determine pricing. Better notes = better pricing.
Tax Implications of Owner Financing
Important: Consult with a tax professional for your specific situation.
General Tax Considerations:
Installment Sale Treatment (If Holding Note)
Capital gains spread over multiple years:
Pay tax as you receive principal payments
Interest is taxed as ordinary income annually
May keep you in lower tax bracket
Must use IRS Form 6252
Example:
$50,000 gain on land sale
Spread over 8 years = $6,250/year
Plus interest income taxed annually
One-Time Gain (If Selling Note at Closing)
Entire gain recognized in year of sale:
Like a cash sale for tax purposes
Total gain taxed in one year
Could push you into higher bracket
But provides immediate liquidity
Consult your CPA to model both scenarios with your specific numbers.
Frequently Asked Questions
Q: What if I've never done owner financing before?
A: That's fine - most sellers haven't. Work with an experienced real estate attorney or title company for your first deal. Or work with a note buyer who provides all documents and handles the complexity.
Q: How do I know what interest rate to charge?
A: For vacant land, 9.9-10.9% is standard and fair. This is attractive to buyers who can't get bank financing and ensures your note has good value if you sell it.
Q: What if the buyer wants a longer term like 15-20 years?
A: Longer terms mean lower monthly payments but more interest over time. They're fine if you're holding the note. If selling the note, 8-10 years is preferred by note buyers.
Q: Can I require a balloon payment?
A: Yes, but this makes the note harder to sell. Fully amortizing loans are more valuable. If you do a balloon, make it at least 5 years out.
Q: What if buyer wants to pay off early?
A: You should allow prepayment without penalty. This is standard and expected. If you're selling the note, the note buyer benefits from early payoff.
Q: How do I find qualified buyers?
A: List everywhere with "OWNER FINANCING" prominent in the listing. Facebook Marketplace, Craigslist, and land-specific sites work best. The financing itself attracts buyers.
Q: What states can I do this in?
A: Owner financing works in all 50 states. Each state has different foreclosure processes, but the concept is universal.
Q: Do I need to be a licensed lender?
A: Generally no, if you're selling your own property. You're not in the business of lending. However, if you plan to do many deals, consult an attorney about potential licensing requirements in your state.
Q: What if the buyer doesn't maintain the property?
A: Your deed of trust gives you the right to inspect periodically. If buyer is wasting the property, this can be grounds for default. Regular monitoring prevents problems.
Q: How much does it cost to set up owner financing?
A: Expect $500-2,500 depending on whether you use title company or attorney. If working with note buyer who purchases at closing, they typically cover document preparation costs.
Q: Can the buyer assume my existing mortgage?
A: This is called a "wrap-around mortgage" and is complex. Your existing mortgage may have a due-on-sale clause. Consult attorney before attempting this.
Q: What if my property has a mortgage on it?
A: You can still offer owner financing, but you must:
Disclose mortgage to buyer
Ensure your loan allows this (check due-on-sale clause)
Make sure buyer's payment covers your mortgage payment
Consider paying off your mortgage at closing
The Bottom Line on Selling Land with Owner Financing
Owner financing transforms land sales from frustrating to fast:
Key Takeaways:
✓ Sell 2-3x faster than cash-only listings ✓ Attract 10x more qualified buyers ✓ Get full asking price (or more) ✓ Recommended terms: 20% down, 10% interest, 8 years ✓ Screen buyers carefully (credit, income, references) ✓ Use professional documents (attorney or title company) ✓ Protect yourself with proper down payment and documentation ✓ Sell the note at closing for immediate cash (typically 80% of balance)
The process:
List with "Owner Will Finance"
Screen and qualify buyers
Accept offer from qualified buyer
Contact note buyer during due diligence
Close simultaneously - receive down payment + note sale proceeds
Walk away with approximately 84% of asking price in cash
You get the speed and price benefits of owner financing with the cash and risk elimination of selling the note immediately.
Ready to Sell Your Land with Owner Financing?
Whether you're considering offering owner financing or already have a buyer lined up,
Damen Capital can help:
We Buy Land Notes at Closing
✓ Pay approximately 80-85% of note balance ✓ Close in 7-14 days ✓ Provide all loan documents at no cost ✓ Handle all complexity ✓ Nationwide service in all 50 states ✓ 150+ notes purchased
How It Works:
Contact us while your buyer is in due diligence
We provide quote within 24 hours
We conduct concurrent due diligence
We close simultaneously with your buyer
You receive cash for both down payment and note sale
Call or Text: 302-526-0200 Email: eric@damencapital.com