How we bought 40 acres and an old house with creative financing

 

My husband, 2 kids, and my pregnant self set out on finding 10 acres after selling our last home. We had been searching for about 9 months doing a month-to-month rent situation with a neighbor of our last home. We had lost that house due to fire(Read our story here) and decided to rebuild as the market had changed. In the process we lived in a park model trailer for about 18 months. (Read my tips on RVing it here!)

I forget exactly what our budget was at the time. We had some money from the sale of our house and some left from our insurance claim. Initially, I wanted to buy the land outright, live in the RV and figure out the rest later. That was, until I found 40 acres with water and power. They were asking 295K and it stated in the listing that it would have to be a cash-only sale. We definitely didn’t have that much. I think about half.

The first visit.. The first time we went to check out this land was just on our own. We traveled through about a mile of forest and fell in love with the drive. We got to an orange gate at which point we decided not to go without our realtor. After we got her to come out, we got to open the gate and go about another 800 feet where we saw a lot of brush, a bunch of out buildings that were in various forms of disrepair, and including a 2 story house. 

 

It was clear that the former owners had dwelled in this home at some point. Instead of typical appliances though, they had a wood burning cookstove and wood heating stove. I instantly respected the resilience of these people.

 We came to find out later it was an older couple who had both passed away. It took the family a couple years to clean but they left a piano. I have had many friends say they thought it was haunted. Cobwebs everywhere, grapevines and blackberries taking over the house, crawling into the windows, and it hadn’t been updated since it was built (they think in the 50s but no records to indicate for sure). Upstairs was even more wild with various rooms started but not finished, windows leading to neighboring rooms, built in desks in random places, and ladders going up to the attic. It definitely had an eerie vibe to it. Cool, but super weird. You couldn’t do more that park, back up, and leave. It was overgrown EVERYWHERE. For us looking for a bare 10 acres, this 40 acres with a house in the middle and some utilities was better than we could have imagined. At the time, the housing market was pretty crazy so it seemed like a good deal. It felt like you were in the middle of nowhere but town was only 7 minutes away. 5 of those minutes was just getting out of the driveway. It was closer to town than we had ever been and felt a seclusion like no other. We were very interested.

How do you finance 40 acres and a haunted house? We quickly found out that it was no easy task to finance this property. But the title doesn’t say “How we almost got 40 acres and a haunted house” now, does it?

The first offer..

I made my cute little attempt at buying half of the land. There were 4 parcels as part of the sale. I knew I could buy half of it without financing. Alas, it was a no go. They wanted all of it sold together.

I looked into getting a home loan. As you can imagine though, this home was not going to pass inspection for a typical home loan.

So I got more creative. I looked into a rehab loan. And while there was definitely a house in need of repair, that particular house sat on 15 acres and because the property would always outweigh the value of the land no matter what we did to it, this was not an option.

I looked into getting a land loan. But because there was a house or structure on the property, it disqualified for a land loan even though the house was not exactly what most people would call “livable”. Rats.

Divide and conquer. I used the fact that we did have some money, and some of the land could technically qualify as bare land because the house was on a different parcel to my advantage. I made an offer contingent on bank approval that we would buy all the land. We would pay 80k in cash for the house and 15 acres. We would get a land loan for the remaining 25 acres. We would sign a contract that made both sales contingent on one another and that we had to buy all the land in the same signing session. They accepted the offer.

Now came the hard part. The bank. The first bank we were talking to worked with us but in the end, they didn’t like the fact that we were getting 15 acres and a house for 80k and paying 215 for 25 acres with nothing. They were assuming more risk than we were.

I thought we were done. But somehow, I got connected with Northwest Farm Credit Services. I ran it by them, showed that other parcels near us were selling for 20k an acre for a 10 acre parcel and we were getting it for 8.6k an acre. It would absolutely be able to sell again for more in the event that we were to default on the loan. Why was the land so cheap? Because the seller didn’t want to divvy up the sales and thought that someone would have to pay all cash. Or because they wanted it gone. Either way, it was being sold at a discount. Maybe the ghosts, I’m not sure. They haven’t bothered us much.

In the end, the bank agreed to the deal. They were able to work with our outside of the box thinking and they granted us our loan with 20% down at 6.75 interest. We signed one pile of papers paying cash for the 15 acres, then immediately signed a much lengthier package due to the loan paperwork. I remember that amazing day so well. Even now as we struggle to get our doublewide done and get out of this park model, I am so grateful that we were able to make it work and buy this land.