Buying land for sale always has its challenges and can be stressful in the most favorable of markets. But when you set out to do it in a seller’s market, the difficulty can reach a whole new level. Today’s land market is red hot, with rural properties attracting multiple offers and selling above list price in many parts of the country. A few weeks ago in Three Ways Low Land Inventory Is a Win for Sellers, we defined a sellers market and discussed how rural land inventory has been dwindling for a few years now, and last year the market was squeezed by buyers fleeing big cities either because of COVID, fear of civil unrest, or simply because they have been freed by remote work and want to move to less crowded rural places.
Buyers are competing for a paltry number of properties for sale and the search can be tedious and down-right daunting. Should I buy now? Would it be better to wait? How long will it take to locate the land I desire? How can I can make my offer stand out? These are all questions that land agents have been hearing from interested buyers. With so much to consider, there’s the potential to develop “paralysis of analysis” when it comes to making any actual decisions. We’re not going to sugar coat it; limited land inventory presents an extra challenge that will be quite competitive, but being prepared can eliminate a lot of the stress from the buying process. While not an exhaustive list, here are some strategies buyers can adopt to successfully navigate an intense seller’s market:
Make Your Land Search a Priority
If you want to buy land within the next few months, you’ll need to position yourself for winning. Treat your land search sort of like a job search; look into land for sale as often as you can and inquire about the properties you are interested in. When you ask the seller (or seller’s agent) for a viewing appointment, request their earliest convenience, not yours. Be sure to follow up on the properties that you are most interested in taking off the market.
Use the Proper Search Tools
Sellers are having a field day- their property is going from “newly listed” to “sold” quickly. Get set up so you can search online for land that meets your criteria. Creating a LANDFLIP Buyer Profile is one way buyers can find success in a low inventory market. Interested buyers can receive automatic emails when new listings within their preferred location get added, match their set preferences, or when a price changes on a saved listing. The email alerts will become your best friend in a seller’s market. Put a plan in place and learn how to to fully utilize the land search tools at your disposal.
Hire a Great Land Agent
Just like in sports, you want to have the best players on your team when facing fierce competition. Buying land is a complex transaction, and it’s not something you’ll want to do on your own. Sometimes it’s easy, but most of the time there are a few hiccups. A land agent is committed to protecting the buyers’ interest. They’ll show you property that meets your needs and your budget. A land agent will use their extensive knowledge of the area and current market conditions to help clients narrow down the list of potential properties, negotiate the best price, and handle the large amount of paperwork involved from contract through closing. Ask friends and family for referrals and make sure they have an intimate knowledge of the specific area you are looking to buy. A well connected land agent will learn of new listings from other agents, even before they hit any of the land for sale websites.
Submit a Strong Offer
In a seller’s market, your first offer needs to be a good one. If you and your agent feel the price is within the appropriate range, consider offering asking price or just above. Forget the lowball tactics. In a seller’s market, coming in well below the asking price is probably going to be a waste of time. If you want to be in the game, your offer should be close to if not higher than the asking price. Your land agent will know the market and can help you figure out the best pricing strategy. Also, leave contingencies out of your offer if you want leverage over other buyers.
If You Can, Make a Cash Offer
All-cash offers are very appealing to sellers. It is the most hassle-free, gives the buyer a negotiating advantage, and can lead to a seller giving you top consideration. If you don’t have to use a lender, there’s no financing contingency, which shows the sellers that you will most likely not back out of the deal due to financial difficulties. The seller perceives that they are dealing with a financially-able potential buyer. A motivated seller is one whose clock is ticking and they might choose a cash offer over an offer that will be financed, even is the cash offer is lower. Cash deals equal a quick closing, which puts money into a seller’s pocket sooner. Time is money, and it is never more true than when negotiating a real estate transaction.
Be Pre-Approved for a Land Loan
Many buyers cannot afford an all-cash offer and will need to pursue financing. In order to set yourself apart from other buyers, you’ll need to get pre-approved for a land loan. Buyers who have a pre-approval letter are more appealing to sellers because they know the buyer is serious, has shown their creditworthiness and are very likely to get a loan providing their finances haven’t changed. LANDFLIP has made it easy for buyers to connect with a lender early in their search for land online, joining forces with Farm Credit institutions throughout the Southeast. Buyers need to be ready to proceed and move quickly when they find land they want to purchase.
Offer a Larger Earnest Money Deposit (EMD)
Earnest money is a demonstration in good faith that shows a seller the prospective buyer is serious. A larger EMD is attractive to a seller weighing multiple offers. Talk to your agent for advice on the deposit, then consider doubling or maybe even tripling that amount. The amount of money deposited is negotiable and submitted with an offer to purchase. The broker will hold onto your EMD and at the closing the earnest money will be applied to the purchase price of the property. If you don’t make it to the closing table, then the earnest money may or may not be refundable depending on the terms of the contract.
Be Ready to Act
If you’re going to jump into a seller’s market headfirst, you’re going to have to be decisive. Once you locate property that you like, don’t let your land get away. You may not have time to sleep on the decision. Make up your mind quickly and write an offer. In a seller’s market, land can fly off the market in as little as a day, and there’s no guarantee that a property you’re interested in today is going to be available tomorrow.
