Finding Land to Farm: Fee Title Purchase with Seller Financing

In this model the new buyer takes possession of the land and makes payments directly to the seller, as written in a "note." This works very well when a good relationship has been established. The landowner can see the property transferred to a promising new farmer, and the new farmer can secure that note—sometimes by virtue of his or her "character" more than conventional lending requirements. Even better, brokerage fees are avoided by both parties. Payments can be structured like a typical mortgage, or in the case of an installment or land contract sale, made periodically. This strategy is often a good way to transfer land to the next generation within a family.

Advantages
◊ In this model, the new buyer takes possession of the land, makes payments directly to seller.

◊ This works very well when a good relationship has been established.  The landowner can see the property transferred to a promising new farmer, and the new farmer can build equity, sometimes without high down payment advantages.

◊ Character loan may be easier in this scenario.  Buyer doesn't necessarily have to quality for traditional bank or government loan.

◊ Landowner can spsread out capital gains for tax purposes. 

◊ Brokerage fees avoided by both parties.

◊ Good way to transfer land to next generation

◊ Installment lan may be structured for smaller initial payments with larger "balloon" pyaments when farmer expects to be more financially prepared.

Disadvantages
◊ If buyer defaults, the land goes back to the seller and the buyer's equity may be lost.

◊ Most initial payments cover interest only, or may be very large.  Required down payments may also be large.

Tomorrow we will finish this series with fee title purchase with agricultural conservation easement.