{"id":579,"date":"2018-06-30T16:19:24","date_gmt":"2018-06-30T16:19:24","guid":{"rendered":"http:\/\/agricultureloan.com\/?p=579"},"modified":"2023-01-04T08:55:18","modified_gmt":"2023-01-04T08:55:18","slug":"pros-cons-owner-financed-farm-sale","status":"publish","type":"post","link":"https:\/\/agricultureloan.com\/pros-cons-owner-financed-farm-sale\/","title":{"rendered":"Pros and Cons of an Owner-Financed Farm Sale"},"content":{"rendered":"<p>If you are looking to buy a farm or farmland, you have two options for financing \u2013 owner-financed or bank financed. Both options have their pros and cons, but in this article, we will focus on the owner-financed sale to help you decide if it\u2019s right for you.<\/p>\n<p>\n<a href=\"http:\/\/trking10.com\/?f5c=j%2Fokrc9%2BMqAHAvTArBO1Uw%3D%3D&s1=&ts=content&utm_source=Content%20-%20agricultureloan&utm_medium=Body%20Text%20Link\" class=\"cta-button-link\">Looking for Current Mortgage Interest Rates? Click Here.<\/a><\/p>\n<h2>What is an Owner-Financed Sale?<\/h2>\n<p>First, let\u2019s look at what an owner-financed sale looks like. Rather than \n<a href=\"http:\/\/agricultureloan.com\/a-primer-to-getting-financing-for-your-small-farm\/\">obtaining financing<\/a> from a bank, you obtain the financing from the person that owns the farm\/farmland. You receive the title for the land and make your payments (principal and interest) to the owner, just as you would have done with a bank. The main difference is who you pay.<\/p>\n<h2>The Benefits of an Owner-Financed Farm Sale for the Buyer<\/h2>\n<p>There are several benefits of an owner-financed farm sale, including:<\/p>\n<ul>\n<li>Lower credit score requirements \u2013 Banks are often tough with their qualifying requirements, including credit scores. They want high credit scores and low debt ratios or you cannot have the financing you need. Individual farm owners, though, can set their own requirements, which are often much more lenient than the bank\u2019s requirements.<\/li>\n<li>Lower interest rates \u2013 Individual owners usually charge \n<a href=\"http:\/\/agricultureloan.com\/what-do-you-need-to-know-about-farm-loan-interest-rates\/\">lower interest rates<\/a> than banks as well. They don\u2019t have the overhead and expenses that banks have. All the landowner wants is to make sure he gets paid on time and with a little bit of interest to make up for the fact that he is not getting the full amount of the cost of the eland upfront as usually occurs in a traditional sale.<\/li>\n<\/ul>\n<h2>The Benefits of an Owner-Financed Sale for the Seller<\/h2>\n<p>It may seem like the buyer gets all of the benefits of an owner-financed farm sale, but there are benefits for the seller too. They include:<\/p>\n<ul>\n<li>Spread out income \u2013 Rather than receiving the money in one lump sum, you receive monthly income, assuming the buyer makes the payments on time. This can serve you well during your retirement years when you don\u2019t have any other income coming into the home.<\/li>\n<li>Lower tax liability \u2013 If you receive the funds in one lump sum, your capital gains are rather hefty all at once. This can result in a large tax liability during the year that you sell the farm. If you provide owner financing, though, you spread out the profit and lower your capital gains, keeping your taxes to a minimum.<\/li>\n<\/ul>\n<p>\n<a href=\"http:\/\/trking10.com\/?f5c=j%2Fokrc9%2BMqAHAvTArBO1Uw%3D%3D&s1=&ts=content&utm_source=Content%20-%20agricultureloan&utm_medium=Body%20Text%20Link\" class=\"cta-button-link\">Click to See the Latest Mortgage Rates.<\/a><\/p>\n<h2>The Disadvantages of an Owner-Financed Sale for the Buyer<\/h2>\n<p>Of course, with the good always comes the bad. There are a few disadvantages buyers realize when using owner-financing, including:<\/p>\n<ul>\n<li>Balloon payments \u2013 Owner-financing often includes a balloon payment in the terms. This means you make 30-year payments for a specific period, but then owe the remaining principal balance on the specified date, such as 5 years into the term. If the buyer cannot secure bank financing to pay it off, they could end up losing the farm and the money they put into it.<\/li>\n<li>Large down payment \u2013 Farm owners typically require a \n<a href=\"http:\/\/agricultureloan.com\/get-farm-loan-no-payment\/\">sizeable down payment<\/a> on the farm in order to provide financing. This helps lower the risk of the farmer losing everything if the buyer were to stop making payments on the loan.<\/li>\n<\/ul>\n<h2>The Disadvantages of an Owner-Financed Sale for the Seller<\/h2>\n<p>Sellers also experience a few disadvantages when it comes to the owner-financed sale:<\/p>\n<ul>\n<li>Large risk \u2013 No matter how much as seller requires for qualification, there\u2019s always the risk of default. If the buyer does default, there should be some type of provision in the financing paperwork that allows the seller to take back possession of the farmland after a certain period.<\/li>\n<li>Second lien position \u2013 If the buyer uses owner financing as a secondary form of financing, obtaining the original funds from a conventional lender, the owner will have second lien position, which can put him at even higher risk of loss if the buyer were to default.<\/li>\n<\/ul>\n<p>Knowing the pros and cons of owner-financed farms can help you decide if it\u2019s right for you, no matter which side of the equation you are on. As a buyer, it can provide you with a great way to get the financing you need. As a seller, it can help you get more potential buyers and owe less takes on your capital gains. Make sure you weigh the pros and cons to ensure that you make the right decision for yourself.<\/p>\n<p>\n<a href=\"http:\/\/trking10.com\/?f5c=j%2Fokrc9%2BMqAHAvTArBO1Uw%3D%3D&s1=&ts=content&utm_source=Content%20-%20agricultureloan&utm_medium=CTA%20Button%20Link&utm_content=Orange\" class=\"button-orange\"><span class=\"\">Click Here to Get Matched With a Lender.<\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>If you are looking to buy a farm or farmland, you have two options for financing \u2013 owner-financed or bank financed. Both options have their pros&#8230;&nbsp;<a class=\"moretag\" href=\"https:\/\/agricultureloan.com\/pros-cons-owner-financed-farm-sale\/\">Read More<\/a><\/p>\n","protected":false},"author":12,"featured_media":641,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[269,270,268],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v21.8 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Pros and Cons of an Owner-Financed Farm Sale - Agriculture Loan<\/title>\n<meta name=\"description\" content=\"The pros and cons of an owner-financed farm sale are plentiful for both the buyer and seller. 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