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How To Buy Land In Maine

Purchasing a property, especially land, can seem like a difficult task. To make it easier you need to start with a plan. Here is a step by step check list of how we approach purchasing.

1. How much can you spend? Are you paying cash, getting bank financing or hoping to find a parcel with owner financing? If you are financing the purchase, work with a lender to see how much you can borrow. This is the most important step. Knowing your price limits and securing financing before you start looking at parcels will save you time, money, shorten your search for land and improve your negotiating position. Statistics from the statewide MLS show the average parcel of land that sold in Maine during the last 12 months closed at about 87% of asking price. This would indicate that looking at lots priced more than 15 - 20% above your price limit is most likely a waste of your time.

2. Pick a location or at least narrow it down. Prices will vary a lot in Maine depending on where you look.  Do a little research online and you can find out a lot about most areas of the state. Call local chambers of commerce for information on the areas of interest.

3. Start looking for property. The internet makes this process much more efficient. Most sites will allow you to save searches and notify you when new land comes on the market that matches your criteria. If you are working with a land broker you can ask them to set up a saved search on the statewide MLS. The broker can program this to automatically send you new listings.

Helpful Hint - When using search engines like Google, be specific using search terms for the type of land you are looking for. For example: timber, waterfront, farm, recreation, hunting, fishing, development, investment or combinations  of these terms and others.

If your timeline is more than 3 months out, subscribe to local magazines such as the Northwoods Sporting Journal. While the property you see advertised there has probably been on the market for a month or more, local magazines, newspapers or journals can help you experience the flavor of different areas, the recreation available in these locations and any current social and or political issues.

Helpful Tool - Download Google Earths free software to your computer. Don't confuse this with the online Google Maps, this is a more useful tool. Ask the owner or Realtor to email you a shape files which will show you the approximate locations of the property you are looking at. These files can be opened in Google Earth. This bird's eye view (and in some areas street views) showing the outlined area of the prospective land can help answer a lot of your questions.

4. Now that you have located some promising Maine land, have studied the data and maps sent by owners or brokers, it's time to take a trip to see the properties. If you are not familiar with Maine weather, you should know to bring layers of clothing and sturdy foot wear for changing conditions. Other good items to help make looking at land more enjoyable would include a small back pack, raincoat, snacks, water bottle, a Delorme Maine Atlas and Gazetteer and camera.

If you are going it alone, also bring detailed maps of the area, a compass and GPS if you have one and know how to use them. Because Maine is a large state with a lot of remote regions of interconnected forests, if you have no experience in land navigation we highly recommend bringing along someone who does. Our agents always let someone know where they are going just to be safe, we advise you do this as well in case you do not return on time.

5. Get on the property to look at the features that attracted you to it. Be sure to view some property lines and abutting properties for potential concerns. Are there nearby areas of interest that make the land more appealing? If so, take time to see them.

6. Now that you have found some acres that satisfy your wants and needs, it's time to write an offer. The emphasis is on the word "write". Verbal agreements don't carry much meaning with an owner who does not know you. Review required property disclosures for any potential hazardous materials, rights of way, tax status and other issues. Write in any contingency you need including due diligence inspections if you have unanswered questions. Don't forget to bring your checkbook for earnest money deposit.

Words of wisdom we can pass along from our own experience. If you find a property that you like and want and you know that the price is fair. Don't mess around offering a lot less, UNLESS you are prepared to lose it to another buyer. A land owner and their real estate agent know when they have a properly priced lot. Even if the property has been on the market for a few months don't assume the owner is going to sell way below market. The average time on market for Maine land last year was over 7 months. Even well priced land in Maine can take some time looking for its new owner.

7. Your offer was accepted! It is time to start the closing process. Ask your lender or your land broker for a list of title companies or attorneys that handle real estate transactions. Work out your due diligence, get that title checked, buy title insurance and close the deal.

8. Enjoy your Maine land.

Comments

  1. David Rivela on

    I'm trying to purchase a lot of land( about an acre or 2) with a manufactured home included on the lot. How do i go about doing that?
    • Phil McPhail on

      You will need to do a construction loan with your bank or mortgage company. Some sellers will finance the lot sale with a balloon payoff when your construction or new purchase loan is completed.

The Pros and Cons of Buying Land with Owner Financing

The most common question we get from people interested in buying Maine land is; "Will the owner finance the purchase"? In some cases the answer is yes, but often the best land we have to offer for sale does not have owner terms of either a mortgage or contract for deed.

Pros

From a buying point of view what are the advantages of financing your land purchase with the owner? .

Less Down Payment

One of the advantages of owner financing is sometimes the down payment requirement is less than required by a conventional bank or lender. If the owner does not have a mortgage on the property they will sometimes finance with less than 20% down payment. This is considerably less than a bank would require.

Easier Qualification

If you have had a few credit blemishes in the past an owner is more likely to extend credit than conventional lenders. Many owners will ask for a credit report and a low score could cause the owner to decide not to finance the property or ask for more money down and/or a higher interest rate. The owner is also less likely to want to see all of your financial history which for many is enough of a reason to stick with the owner. Some banks and other lenders require a lot of documentation to consider a loan.

Cheaper Closing Expenses

Owner financing usually comes with lower closing cost requirements. Owners will rarely ask for appraisals, points, flood certifications, title work among other things. For buyers looking for short term financing the cost savings of low closing cost may be the reason they want the owner to hold paper.

Time

Without any question the purchase of land with the owner financing the transaction is much quicker than the same loan with a bank. Most owner financed land deals will close within 2 weeks of the offer being accepted. The owner may have a licensed loan originator package the deal but no underwriters or other reviewers will need to approve the deal.

Cons

For the buyer who insists at only owner financed purchases the downside could be considerable. You may think that owner financing is the best way to purchase but here are a few things you should consider before ruling out other means of borrowing.

Interest

Most owners ask for and get interest rates from 1 - 4 % higher than some of our conventional banks charge. Over the life of the loan this increase in rate could add up to thousands of dollars in additional land cost.

Less Choices

Many owners have mortgages on the land that they are selling. With a few exceptions most of the owners lenders will require them to pay off the note with the bank if they sell the property. This could cause the seller to ask for a larger down payment or refuse to consider owner financing altogether. If this is the perfect property for you, other forms of financing should be considered in order for you as a buyer to have all land available for you to purchase.

Higher Price

If you are asking the owner to finance the transaction they are less likely to take less than they are asking for the property. Having financing secured ahead of time with an alternative lender will put you in a position to offer the seller an all cash deal. Many, if not most owners will negotiate a better price for an all cash deal.

When looking to buy land in Maine keep all of your options open for purchasing the right property. If you have sufficient down payment, good credit and patience; owner financing is not the best choice. Many more properties at better prices will be available to you with an all cash offer. Call us today for a list of land friendly banks and other lending options.

Comments

  1. OK Cash Home Buyers on

    This is very informative and is probably one of the best presentations of the pros and cons. Thank you for sharing
    • Owner Finance OKC on

      Awesome presentation, thanks for such a comprehensive article
      • Sooner House Buyers on

        Very well presented article, good job writing such a comprehensive article, totally share-worthy