Eric Scharaga
Founder, Damen Capital
Private lender and direct land note buyer serving land investors nationwide. Featured on REtipster, Legends of Land, and Land Investing Online. LinkedIn →
Seller financing means you act as the bank. The buyer pays you a down payment and monthly payments instead of bringing all cash. On vacant land this one option sells parcels two to three times faster at full price, and you do not have to wait years to get paid. This module covers why it works and what the math looks like at closing.
Prefer to read? Everything in the video is written out below. This is module 1 of 14 of our free seller financing course for land.
Seller financing means the land seller acts as the lender: the buyer pays a down payment and makes monthly payments to the seller instead of getting a bank loan.
The buyer gets the deed at closing. You hold a lien on the parcel through a deed of trust or mortgage, and the buyer pays you until the balance is paid off. It is the fastest way to sell land, and the note you create is an asset you can sell.
Here is the part most land sellers miss. You do not have to hold that note for 8, 10, or 15 years. You can sell it at closing and walk away with cash. That is the model this whole course is built on: use seller financing to attract the buyer, then sell the note so you are not stuck collecting payments.
Banks rarely lend on vacant land, so most land buyers have no financing option unless the seller provides one.
Banks dislike land because it produces no income, is hard to value, and is hard to liquidate. Most will not write a land loan under $150,000, and the ones that do take 30 to 45 days of underwriting and often reject the deal anyway. That leaves buyers with two choices: pay cash or do not buy.
That problem for buyers is your opportunity. Most people do not have $50,000 in cash for a parcel. Most people do have $10,000 and can make a monthly payment. The moment you offer seller financing, your buyer pool goes from the few people with cash to everyone with a down payment and decent credit.
You sell faster, you get full price, and you still receive 84 to 90% of the sale price in cash at closing.
Faster: more qualified buyers means properties that sat for months get offers in weeks. Full price: cash buyers expect a 10% discount, financed buyers pay list because you solved their biggest problem. Cash: sell the note at closing and collect most of the sale price on day one.
On a $100,000 sale with 20% down, you keep the $20,000 down payment and sell the $80,000 note for about $68,000, so you walk away with $88,000 in cash.
A cash buyer might offer $90,000 and take six to twelve months to show up. With seller financing you sell for the full $100,000 in two to four months, keep 100% of the down payment, and sell the note to us at closing. You end up a few thousand dollars under the cash number and months ahead.
| Line | Cash sale | Seller finance, sell the note |
|---|---|---|
| Sale price | $90,000 (10% discount) | $100,000 (full price) |
| Down payment you keep | n/a | $20,000 |
| Note balance | n/a | $80,000 |
| Note sale at 85% | n/a | $68,000 |
| Cash at closing | $90,000 | $88,000 |
| Time to sell | 6 to 12 months | 2 to 4 months |
We pay 80 to 90% of the note balance depending on the down payment and the strength of the buyer. The full pricing rules are on our note buying criteria page.
Velocity of capital means turning your money faster, and four deals at $40,000 profit beat two deals at $50,000.
Scenario A, cash only: two deals a year at $50,000 profit is $100,000. Scenario B, seller finance and sell the note: four deals a year at $40,000 is $160,000. Lower profit per deal, more total profit, and your risk is spread across more transactions.
Volume beats margin when you can move quickly. That is the whole argument for selling the note at closing instead of holding it. Your capital comes back in weeks instead of years, and it goes into the next parcel.
When we buy the note at closing, we provide the loan documents, the transfer documents, coordinate with the title company, and can help screen the buyer.
You focus on finding parcels and negotiating with buyers. We supply the promissory note, deed of trust or mortgage, and assignment paperwork, and we work directly with the title company so you never have to explain seller financing to a closer who has not done one. You show up and get paid.
You get every benefit of seller financing, faster sales, better prices, a bigger buyer pool, without the paperwork and without the default risk down the road. Once we own the note, a default is our problem, not yours. The rest of the course shows you how to price, screen, structure, and close so the note is worth the most when you sell it.
Transcript of Module 1, lightly edited for readability. The video was recorded before we passed 250 notes; the figures on this page are current.
Hi, my name is Eric Scharaga and I'd like to welcome you to this special course on financing for vacant land. My goal is to help you integrate and optimize a seller financing process so you can maximize your land sales. Even if you have no prior experience with seller financing, you will leave this course with important information that will help you sell land faster and for more money.
As a note investor, I've purchased over 150 land notes. I'm also the author of Lienlord, a book on note investing. Before we get started, I need to provide a quick disclaimer. I'm not an attorney, CPA, or financial advisor. Everything I'm presenting here is solely based on my personal experiences as an investor. Always consult with qualified professionals before making any financing decisions.
Now let's dive in.
Let's start by defining our subject matter. Seller financing just means that you act as the lender. Instead of requiring the buyer to pay all cash or try to get a bank loan, they pay you a down payment and make monthly payments directly to you until the property is paid off. It's a fast and easy way to sell property. But here's the key.
You don't have to hold that note for 8, 10, or 15 years. You can sell it immediately at closing and walk away with cash. This is the best of both worlds, and I'll show you exactly how this works in a moment.
Why is land perfect for seller financing? Because banks hate financing land and are extremely slow to do so. They don't like land because it doesn't produce income, it's hard to value, and it's difficult to liquidate. Worse, banks typically won't make loans under $150,000 because the profit margins are too small considering all of the work of originating the loan.
It's slow because they may take 30 to 45 days of grueling underwriting just to end up rejecting the deal. This creates a massive problem for buyers. If someone wants to buy your $75,000 parcel of land, they basically have two options, pay all cash or don't buy it at all. This problem for buyers is your opportunity.
Most people don't have $50,000 in cash to buy land, but most people do have $10,000 and can make monthly payments. When you offer seller financing, you immediately open up your buyer pool infinitely.
What are the three major benefits of offering seller financing? First, you'll sell two to three times faster. More qualified buyers equals faster sales. Properties that might sit for months without the option of seller financing suddenly get multiple offers within weeks. Second, you get your full list price or higher. In today's real estate market, Cash buyers expect a 10% discount minimum. Seller financing buyers happily pay full price because you're solving their biggest problem and providing them with a huge luxury of being able to pay over time. Third, you receive between 84 and 90% of your sale price in cash at closing. Here's how it works.
Let's say you have a $100,000 property. A cash buyer offers $90,000, but it might take 6 to 12 months to find them. With seller financing, you sell for the full $100,000. The buyer puts down $20,000, and you keep 100% of that. That creates a loan balance of $80,000.
Instead of collecting payments for 8 years, you sell that loan to me at closing. I buy the loan at 85% of the loan balance, which means I pay you $68,000. You walk away with the $20,000 down payment plus $68,000 from the loan sale. That's $88,000 total, or 88% of your $100,000 sale price.
all in cash at closing. You sold in two to four months instead of six to 12 months, and you're only a few thousand dollars off the cash sale price of $90,000.
How do I make this easy? When you sell me your loan at closing, I handle everything. I provide all the loan documents, the promissory note, deed of trust, and all related paperwork. I provide all the transfer documents. I coordinate with the title company so you don't have to explain seller financing to someone who's never done it. I can help screen buyers to ensure they qualify.
You focus on finding properties and negotiating deals, and I handle the paperwork and process. You just show up to closing and get paid. This means you get all the benefits of seller financing. Faster sales, better prices, a larger buyer pool, without any of the complexity or headaches, or the risk of default down the road. Let's talk about the velocity of capital.
Here's why this matters for your business. In scenario A, which is cash only sales, you close two deals per year at $50,000 profit each. Your annual income is $100,000. In scenario B, you seller finance and sell the loans at closing. Because you were selling so much faster, you close four deals per year at $40,000 profit.
each. Your annual income is $160,000. You're making more money with lower per-deal profit because volume beats margin when you can move quickly. Plus, you're spreading your risk across more transactions instead of having everything riding on one or two deals per year.
In the upcoming modules, you'll learn exactly how to make this work. We'll cover pricing your properties, finding and screening buyers, structuring deals, required documents, and avoiding costly mistakes. Whether you do this yourself or work with me, you'll have everything you need to successfully implement a sound seller financing strategy. Remember, most people don't have $50,000.
but they do have $10,000 and can make monthly payments. This one insight can transform your land business. In module two, we'll dive into how to price your properties for maximum profit using seller financing. Let's keep going.
The seller acts as the lender. The buyer pays a down payment and monthly payments to the seller, who holds a lien on the parcel until it is paid off. The seller can hold the note for income or sell it for cash at closing.
Land produces no income, is hard to value, and is hard to sell quickly. Most banks will not write a land loan under $150,000, and the ones that do take 30 to 45 days and often decline.
Typically 84 to 90% of the sale price: 100% of the down payment plus 80 to 90% of the note balance. On a $100,000 sale with $20,000 down, about $88,000.
No. You can sell it at closing. We buy land notes with no seasoning, so you get paid the same day the deal closes.
Tell us the property, the buyer, and the terms. Written quote in 24 hours, cash at closing, no seasoning.
Private lender and direct land note buyer serving land investors nationwide. Featured on REtipster, Legends of Land, and Land Investing Online. LinkedIn →