Why People Sell Land at a Discount
Potential investors are often curious to know why people are willing to sell us land at a discount.
First, we pay cash, close quickly, and make transactions easy for sellers.
Second, people sell for different reasons based on their personal circumstances. Death, divorce, and taxes are common reasons, but not the only ones. It varies across individuals.
Third, we focus on land that attracts fewer real estate agents. In turn, many sellers choose to sell at a discount rather than trying to become land experts themselves.
In fact, selling at a discount is quite common. I’ve happily done it myself.
Years ago, my wife and I became new parents and upgraded to an SUV so it would be safer for our newborn.
My wife was still driving her first car, and to be honest, it had seen better days.
After some initial negotiations, the dealership offered $1,000 for a trade-in. With a smile on my face, I shook the sales manager’s hand and accepted the offer.
But why? I knew full well I could sell it for a higher price.
I simply didn’t have the time or inclination to become an expert in early model Hondas.
I’d have to do the following:
Research values
Determine a list price
Take photos
Write a description
Post ad copy on various marketing platforms
Answer sales calls and emails
Coordinate test drives
Negotiate final pricing
Properly title the car and finalize paperwork
I’m confident that doing so would have netted at least $2,000. But with a family, career, and many other commitments, I happily took an offer for 50% of the value.
Sure, I could have become an expert in selling early model Hondas. It just wasn’t worth my time.
So why am I telling you a story about selling an old car? Well, it’s the same situation landowners find themselves in for several reasons.
Selling a Home with a Real Estate Agent
Most people sell homes through an agent.
The seller signs a listing agreement, and their agent coordinates many aspects of the sale and guides them through the closing process.
As compensation, each agent will typically earn a 3% commission on the purchase price.
The average price of a home today hovers around $350,000, and agents put in a lot of work to successfully close a transaction. In turn, they’ll generate around $10,500 in commission for their effort.
Selling Land with a Real Estate Agent
Returning to land, what happens when a land seller approaches an agent with a $50,000 piece of land?
An agent would earn $1,500 in commission with the same amount of work. They’d have to sell seven times the number of smaller land deals to equal the commission from one home.
In addition, they’re already busy selling homes in town.
Agents aren’t motivated to drive out through rutted dirt roads to visit a piece of dirt. In turn, if they accept the listing at all, they’ll end up doing the bare minimum.
This likely means taking a screenshot of satellite imagery with a basic description of “5 acres of raw land for sale.”
Several sellers we’ve worked with have reported similar experiences. After a year of waiting, the listing agreement expires, and the landowner goes away frustrated and unhappy.
For people with land under $100,000 or so, their options become limited.
This puts someone with lower priced land in a bind. But they can always sell it themselves…
Selling Land By Owner
Imagine someone from Connecticut inherited a parcel of raw land out West.
They vaguely recall hearing it was bought decades before they were born, but no one in their family has ever visited the land.
Once they start receiving property tax bills they consider listing the land. But given the price point, no real estate agents return their calls.
They consider selling the property themselves, but don’t have time to:
Research values in a state they’ve never visited
Determine a list price
Hire a photographer
Write a description
Post ad copy on various marketing platforms
Answer sales calls and emails
Coordinate property visits
Negotiate final pricing
Research the closing process in another state
Properly title the land and finalize paperwork
It’s just not worth their time.
The owner could attempt to gain expertise in a specialization that would likely be used once in their lifetime.
However, they decide they’re better off spending time with their family or advancing their career.
Selling Land to Meridian
At this point, a potential seller might receive an offer from Meridian.
We’d offer to pay cash, close quickly, and handle the transaction securely through a licensed title company.
Much like the offer for my wife’s car, it would be at a discount to retail value.
The seller won’t have to become an expert in land valuation. They won’t have to learn sales and marketing. They won’t have to take sales calls and navigate prospective buyers through a labyrinth of unmarked dirt roads. Finally, they won’t have to figure out how to properly coordinate a real estate closing in a different state.
They’re happy to accept a discounted offer.
In the same way I was happy to accept the discounted offer on our car.