Can You Resell a Seller Financed Land or Property?

Question

Does anyone have experience with reselling a seller financed land or property? (Is this legal?)

For example, let's say you get a 10 acre vacant land for $100k but have it seller financed, so it's $10k down and $1k/mo for x number of years. Can you then advertise the land to resell to another buyer (cash) for $120k and then pay off the original seller, and pocket the $20k?

Same with a house, can you get seller financing on a $500k house and put $50k down, and pay $2k/mo, but then immediately find a buyer (ex. 1-3 months) and sell it for $550k and pocket the $50k?

Are there any rules, laws, or regulations regarding this? What types of contracts would you need?

And would this be considered "capital gains" since it's re-sold under 1-year therefore having to pay a large % of tax on the profit?

Matt Devincenzo · Answer

Yes you can, you're just selling like any other sale. Ignore seller finance for a second...

Can you buy a house, put 20% down...yes. Can you then decide to list and sell the house two months later...yes. That is exactly what you are doing. In any contract you don't typically need a clause saying what you CAN do, its assumed you can do anything legally allowed as an owner including sell. The seller would need to include a clause saying what you CAN'T do, which is what a pre-payment penalty would address.

Jay Hinrichs · Answer

yes its called a wrap.. google "all inclusive Deed of Trust" fantastic CA document we used all the way back in the early 80s

Jay Hinrichs · Answer

Matt answered this question for you.

Bob Asad · Answer

Maybe the example is more challenging for a house as the property.

Ex. with vacant land - seller finances to me $20k with 5% down and $1k/mo

Can I after 1-2 months, then resell the land to a cash buyer for $25k, pay off the original $20k and pocket the $5k?

If so, does the original seller finance contract need to say "buyer can resell at any time without prepayment penalties"?

Zach Howard · Answer

My understanding (but don't take my word for it because I'm totally new to real estate investing, i.e. ZERO properties so far) is that with seller financing you can write up the contract pretty much any way you like. If you plan to resell, I think it's wise to discuss with seller in advance and that way the lien on the property can be transferred to second buyer, but you can continue to make payments at the former schedule etc. I think everything is up for discussion and negotiating.

Not legal advice though ^^ I'm mostly reading and posting to learn.

Matt Devincenzo · Answer

Sure that's the same as any financed purchase that you just sell. The only issue with seller finance and resale is if they don't want to receive a payoff in short order, then they should include a pre-payment penalty.

Bob Asad · Answer

If I'm not mistaken though a wrap would require the 2nd buyer to also agree to financing terms; which would be the same as me (the 1st buyer). In other words, two financing agreements "wrapped" together.

But the goal here would be for the 2nd buyer to close all-cash (to skip the financing process), would that still work? Meaning they buy the property at once. If this is the case, would the original seller financing have to mention that the buyer (me) can re-sell the property at any time?

Can You Resell a Seller Financed Land or Property?

Can You Resell a Seller Financed Land or Property?

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