Bank loans for retail land buyers

Hey Tipsters,

I'm getting into some larger land deals that without seller financing or a bank loan, would be out of reach for most buyers.

I was hoping someone had information regarding the conditions a bank would loan on vacant land (not a construction loan). I have heard that they will start landing after a certain dollar amount. Can someone clue me in on what that threshold may be?

I assume it varies throughout the states so maybe the southwest would be a good start.

I appreciate your help,



Maybe the better question is with higher value properties [$50k+], where you do not want to offer owner financing, do you have a canned response to offer buyers looking for financing? I can think of explaining the idea of a HELOC, but could use information about other avenues of financing.

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@greg-morris some of this has to do with the bank itself. In my market right now, some banks are very aggressive and willing to lend a lot more than others.

It also depends on the individual borrower and their financial situation. Some borrowers represent a much lower risk than others, depending on how strong their personal financial statement is.

For some banks, it may be as simple as a value threshold, but I think it probably has more to do with the individual aspects of the property and how reliable that value (whatever it is) happens to be. For example - a vacant lot in the middle of Manhattan will have a pretty darn reliable value, but a vacant lot in the middle of nowhere (no matter how big it is) will be harder to be confident about, because the supply and demand is a completely different story.

@retipsterseth, this makes sense.

Most of my buyers have been withdrawing funds from retirement accounts to fund their purchase. But pulling $100k out seems less realistic for most.

Have you been active in a rural market where it is common for folks to get traditional financing?

@greg-morris there is one lender I know of that works in Michigan and Wisconsin that openly advertises that they do land loans, but knowing how banks work, I'm 100% sure that's not a blanket statement. It doesn't mean they will do ANY loan on ANY piece of land, there are still a lot of qualifiers and boxes that need to be checked. All banks will use the 5 C's of Credit (among other things) to make sure the overall credit is strong enough to mitigate their risk in the deal.

In many cases, a lender won't necessarily turn down a deal if ONE of these metrics is weak (for example, if the collateral value is hard to verify, which is common with vacant land), but if this is the case, they better be able to identify a lot of other financial strength in order to approve a loan (e.g. - the borrower should be very strong financially, or they should have additional collateral to support to credit, so they won't have to rely on the collateral value or the land if everything falls apart).