is seller financing on a lake lot amortized or can it be simple interest?

Asked by Julie, 78737 Sat Apr 27, 2013

This is a lot next to a lot that has a lake home on it. no improvements, we just want the extra land.

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Jeffrey Schn…, Agent, Austin, TX
Sat Apr 27, 2013

Sounds like you own a piece of property with a home on it, and you want to buy the lot next to yours so you have a larger plot of land, correct?

If you've already established reasonable market value, and your confident in that number (that's a big question mark), then you and the seller can negotiate anything that makes financial sense to the two of you. But, separate market value from the payment terms, otherwise you have no idea what you just paid for.

Again, if you are confident in the market value of the property, then it's just a matter of determining the details of the loan. Interest rate, payment type, payoff date or balloon date, down payment, etc.

But be careful, don't attempt to write up the loan document unless you're an attorney, and preferably a real estate attorney. If you need an attorney, there are several good ones in town that are reasonably priced. One wrong comma, or word, and you could end up on the short end of the stick without the land you thought you bought, and without the money you paid the seller. Some people go find a "proforma" loan agreement. With that you get "proforma" legal help, which means you get nothing and cannot defend the fact that you relied on some source you have no idea about to create your agreement.

Note, as you may already have determined, the value of that land, being near water, has many factors that affect it's value, more so than a typical lot. And it's worth a lot more to someone else if it touches the water or has ownership into the water, if it has road access, if it has an elevation that can be built on, if it permits septic or has sewer, if it allows a boat dock, if it has views, etc.

If you do buy the lot, consider "joining" the lots for tax purposes, you'll pay less tax by doing so.

Use the same attorney to draw up the title documents (deed), and to issue title insurance. Without title insurance, and without doing a title search, again, you're in a position of potentially thinking you bought something the seller had the right to sell, when they may not actually have that right. Even if they show you a deed with their name on it, that doesn't prove they have the right to sell it.

Best of luck,

Jeffrey Schnabel
Broker | Partner | Keller Williams
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JOSEPH E JAR…, Agent, Austin, TX
Sat Apr 27, 2013
Julie, that really depends on the seller and what kind of terms they're putting forth. If you do not yet have a Realtor, feel free to contact me and I will look into this particular seller financing deal for you and determine what type of structure they are looking for.

Joe Jarusinsky, Realtor/Master Instructor, Keller Williams Realty, Austin's #1 Real Estate Company, Ranked #1 by Buyers and Sellers (JD Power & Assoc. 2012) Call 512-261-4415
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Barbara Coker, Mortgage Broker Or Lender, San Antonio, TX
Sat Apr 27, 2013
All below is good advice. I recommend you have a recorded lien rather than a "contract for deed." That will protect your interest. Also, get a title policy.

Barbara Coker
Licensed Mortgage Loan Officer
100% Home Loans All Over Texas!
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Ronald Culli…, Agent, Austin, TX
Sat Apr 27, 2013
It depends on what the seller is willing to do. Most seller financed sales involve simple interest for a period of years, usually five with a ballon payment at that time to pay off the entire loan. You should get the services of a good agent and attorney to make sure that the price you pay is appropriate as well as the terms being what you want.

Ron Cullinan
Avalar Austin
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David Samuel, , Austin, TX
Sat Apr 27, 2013
As the others have said, with seller financing they can negotiate whatever terms they like. Usually if you bring your own money to the table (either cash or a loan from your bank) you have a lot more wiggle room. Have you discussed with your Realtor what type of offer you are comfortable with yet?
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Bill Austin, Agent, Austin, TX
Sat Apr 27, 2013
Depends on what you negotiate. A seller can do whatever they want or agree to.
Use a Realtor or an attorney...

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John Staplet…, Agent, Cedar Park, TX
Sat Apr 27, 2013
Most likely needs to be decided within your offer to purchase.
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