Has anyone purchased bare land?

How did it go compared to purchasing property with a house?

We've already contacted one lender and they said they are not doing any land-only loans right now.

Other people we've talked to have said expect to put 20-25% down (at a minimum) and 10-15 year MAX term.

Has anyone purchased land only in the last 1-2 years, with no intentions of developing (no construction loan/wrap up). If so looking for your view.

The land zoning info
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Zoning Description Residential
County Use Code: : Rural Land Over 20 Ac
Universal Land Use: : Agricultural Land

We were hoping to put 10% down on a 30yr loan but it appears bare land isn't done that way...

I have purchased a few parcels of undeveloped land in New Mexico. However, never with bank financing so I'm not sure how helpful I can be.

If bank financing seems difficult to obtain for whatever reason, owner financing may be worth pursuing. I would avoid anything similar to what in New Mexico is called a 'real estate contract' where you pay a fixed amount each month but lose all of your interest if you miss a payment.

The main things to consider with land purchases are probably known to you: Insurable title, legal access, easements, mineral rights (often with oil and gas differentiated from other minerals) and access to utilities including water rights if you will eventually need them. Most of this will show up on your title insurance binder (as exceptions). In any purchase agreement, make sure you give yourself an out if something doesn't meet your satisfaction on the binder.

All of the land I've purchased was essentially agricultural land. Obviously, if you are buying with an eye towards future development, you would need to consider more such as flood zones and any zoning. You are welcome to PM is you would like.

David.

We've talked to over 3 lenders and NONE will touch a Land Only loan right now.

Looking into owner financing options.

That's just weird -- I don't get it. The land isn't going anywhere. Unless it's grossly inflated in price (speculation), I can't see how a lending institution could come up short. There must be some other reason. Maybe the loan doesn't "produce" well enough to meet their current business model. If they only have so much money to lend, they're going to focus on the best returns. Or maybe, in a time of inflation, bare land doesn't appreciate in value like a house, and that leaves them exposed.

Yeah, you would think...

Another thought my be to try agricultural lenders such as farm credit bureaus. I haven't dealt with one in quite some time but since they mostly lend on land, they might be more willing. Probably a long shot in the end but you never know. I found a few by Googling 'agricultural land loan'.

A little insight from banks' perspective.

Banks historically have had little appetite for land loans (except ag-purpose) unless tied to eventual construction and long-term loans. Particularly true for acreage/rural land. Other conditions that will negatively impact: private road maintenance agreements; no site-improvements, e.g. water well, electric service to property line.

Chief reason for the aversion? Raw land is "illiquid" and considered high-risk. Along with single- and special-use real estate, it's among the most difficult to sell in a worst-case default/foreclosure situation. That's true more than ever in today's climate of flat or declining real estate values with no change on the near-term horizon.

If a bank will lend on raw land, down payment requirements are steep -- 30% minimum and 50% isn't uncommon. Loan maturities are kept short. Think less than five years; one year not uncommon.

Throw in the fact that banks are now in a "conservative lending mode," especially real estate-secured. They're wary of the economic outlook in general, and the real estate market specifically. And they're receiving more stringent scrutiny from their state and federal regulators (paying for sins of the recent past). Some are trying to clean up their balance sheets (improve dubious loan quality).

My best sugestion -- apart from attempting owner/seller financing like others suggested -- is to inquire at an independent community bank. They often try to fill the void left by the 'big banks.' If they'll consider, be prepared for them to require your entire banking relationship, e.g. checking, savings, credit card, safe deposit box etc. They won't look favorably at a one-off land loan by itself.

I assume that if you're buying your present residence and have the capacity to borrow against it -- either through refinance or equity line -- you've already considered that avenue.

Not an option I'd recommend, but if you want to examine every possibility ... 401K loan, assuming you have plan with sufficient balance. Advisability depends on factors unknown here. Remember that if you leave the job -- whether voluntary or involuntary -- the then-current balance will likely be due and payable in full; meaning a taxable distribution to pay-off the loan, and a penalty if you're under 59-1/2.

Thanks for the good information xbanker!

We are going to hold out until next year, or sometime in the future when it would potentially be possible to buy it out right when they drop the price again

At that point in time we may also refinance, and if possible take money out. Right now we have a few renovations to complete prior to this, but either way we need to just to save money since our rate is well over 1% higher than standard right now!!

Good decision IMO. In my experience, most times, when someone tries 'too hard' to make a real estate deal work, regret soon follows. Listen to that inner-voice.

Good for you, treating this as an 'educational dry run' that's sharpened your focus and will better prepare you for when that next opportunity presents itself.

Let us hope for another 50% price reduction without an increase in interest rates by the time that happens so as to not make the 50% price reduction turn into the same payment for me yet profit for the banks/gov!!

For now.. TRACTOR