Your ‘How To’ Guide
Land is in a whole different ballpark to a traditional house when it comes to closing, no appraisals, no inspections, no structure to pick out flaws and issues. Turn on the tv and you will see the many shows on any given day about fixing and flipping houses and the glamorous real estate agents in high end markets listing and selling houses in the millions of dollars and ending in a very nice commission. Big returns for all involved, especially in this current market of increasing house prices.
Then there is raw land – dirt, grass, brush, desert you name it. There is a reason you don’t see programs about the raw land market, its not glamorous, not one little bit. The tv producers can’t justify an hour program of someone sat on a computer researching wet land data, checking to make sure the title is clean, researching the back taxes and liens, etc. Then imagine driving to the vacant land parcel, kicking some dirt, picking the dirt up and sifting it through their hand. Back to the office and back to the paperwork.
Would you watch that on tv? Probably not, the only show that can make dirt mainstream is Gold Rush and we all know there is some of that shiny stuff at the bottom. So, watching tons and tons of overburden being moved with the guarantee that we will see some of the precious gold at the end of the show is what keeps us hooked.
However, most vacant land doesn’t have guaranteed gold (or even mining rights to access that gold if there is) at the bottom. If your land does, don’t sell it! Gold is at an all-time high go get a shovel and a mini wash plant and get digging. Insert disclaimer here that you should consult the county first and get the correct rights in place to mine…
Now, hiring a realtor to sell your house is a no brainer, they have knowledge and the ability to sell your house with maximum effect and minimal effort from you. Of course, you can sell yourself, but a realtor can be a massive asset to you in selling your house and they act on your behalf to get you the best deal possible within the market.
But to my point I started on, land isn’t glamorous, and of course compared to a house within the same area and market, land is anywhere from 5% to 20% of the value of a house on a similar plot. Added to that, the fact that land is hard to value, for example, in the Tucson market with heavy rainfall there can be deemed flood zones which require extra insurance if you want to build and even worse wash channels which have setbacks and could render a plot unbuildable. So, the parcel across the street could be a buildable plot whereas the one across could have a wash running through and with set back laws to also consider could mean that parcel is never going to be approved as a building plot. The building plot holds value the other plot is just an infill plot for which its best use is as a garden extension.
There is also the point of commissions, the value of land within the area is much less than the value of land. That’s not to say that the value of land in Orange County far outweighs the value of a house in the suburbs of Detroit, but we are talking within the market of the realtor in that territory. Therefore, the commission on the sale of land is much lower than a house and so less time may go into marketing the land for sale and some parcels can sit for years unsold.
Within the current market, see our post on The Rising Cost of Living, owing vacant land that has no use and gives no stream of income like for example a residential house can be a huge burden at this time. Especially because instead of generating income it actually takes a negative effect on your cash flow having to pay taxes and in some cases HOA (Homeowners Association) fees.
Selling your land without a realtor makes sense in some situations, if you need cash fast, we can help. If your vacant land fits into our criteria we can offer you cash and fast closing. We also provide you the option that if you aren’t in urgent need, we can offer a little more for taking a little longer to close via an option agreement which gives us more time to complete our due diligence and processes.
Many banks and lenders will not finance the purchase of raw land, unless its part of a buy and build in which case closing on the land depends on the buyer obtaining and securing financing and the risk of that falling through at closing. We pay cash without financing so that is not an issue when it comes to closing.
We want to help you with your problem and offer you a solution to what ever your problem may be.
Other considerations you may wish to make would be like with a car, house, anything, condition is key, if you tidy the land up, cut the grass, clear any trash and so on, it can make a large difference to its desirability and marketing.
Other considerations on the use of the land are also important to consider when selling your land:
- What is the zoning?
- What is the permitted land use? (different to zoning)
- Are there utilities available at the plot line, electric, telephone, water, gas, sewer, internet?
- If no sewer tie in, has a perc test ever been performed on the land?
- If no water tie in, how deep is the water level in the event of needing to dig a well?
- Are there any easements? See our article here on What Is An Easement
- Are there any deeded restrictions?
- Are there any HOA fees, if so, how much?
- How much of an effect does the HOA have on the use of the land? Some HOA’s have very strict rules!
- Are there any liens held on the property? Back taxes due?
- Has a professional surveyor marked out the property in the past?
- What is the current market for land in the area? Desirability, buildability, values fluctuate based on many factors and sometimes values can change from one side of the street to the other.
Those are just a few ideas to consider when looking to sell your land and the value you have in your head that you need to get from the sale.
There is also the paperwork involved, we issue our own Purchase and Sales agreement or Option agreement so the paperwork is dealt with our end. We also mostly close via title agency for which we pay all the closing costs to make sure the transfer is done right and fair.
In summary, do you need a realtor to sell vacant land? That decision is up to you, there are pros and cons as with anything you do in life. If you decide not, get in touch with us and submit your details on our Get An Offer page, if your property fits in our criteria, we will get back as soon as possible with an offer.
All the best for now,
Matthew & Kathleen
The above is an opinion and is meant for information purposes only, this blog is not intended to be investment advice. Seek a licenced professional for investment advice.
