Is Land Hard To Sell?

This article will discuss seven reasons why selling land can be extremely challenging. If you've attempted to sell land before, you're likely familiar with the difficulties involved. Land sales typically do not happen as swiftly as sales of other assets such as houses, gold, cryptocurrency, or stocks. Here's why...

Is Land Hard To Sell?

1. Significant differences in how value is perceived makes land hard to sell

The land market is highly unpredictable. I discovered this early on in my land investment business while preparing to make offers on rural properties in LA County. I painstakingly compared hundreds of properties manually (thanks to LA County's excellent GIS) and encountered a common scenario: Property X was sold for $3,000, while Property Y, identical to Property X, was sold for $50,000.

What's interesting is that both properties were situated next to each other and were sold in the same year. This illustrates a fundamental truth about land: some individuals believe their land is worth a fortune, while others see it as having little to no value. This significant gap in perceived value between buyers and sellers contributes to the market's high volatility. Such volatility results in fewer buyers agreeing with your pricing, making it challenging to sell land.

2. Lack of liquidity makes Land Hard To Sell

Are you looking to get cash for your land quickly? It's not that easy. Land is considered one of the least liquid types of real estate, which means selling it and receiving the money can be a lengthy process. Finding a buyer might take months or even years, making the land market less appealing to potential buyers and adding to the challenge of selling land.

This is in stark contrast to the housing market, where properties can be sold within days in some cases, or the stock market, where you can liquidate your entire investment portfolio in seconds. That's what true liquidity looks like!

3. Unsuitable for living without substantial expenses, effort, and hazards makes land hard to sell

When purchasing a home, everything is typically approved and ready for you to move in and start living right away! However, when it comes to buying land, you can't simply move in unless you plan on residing in a hut purchased from REI. Constructing on land can be quite challenging. Initially, you need to secure approval from the county and acquire permits. Subsequently, you have to figure out how to access power, water, and sewage. Any misstep in these processes could lead to the failure of your entire project or force you to live completely off the grid in a mud hut.

Adding to the complexity, you might face significant tax obligations. I once spoke with a construction company owner who had recently built a house on a neighboring lot to the one I was considering. His revelation was startling: "Bart, I had to pay $37,000 just for the building permit. Honestly, I don't think I will undertake another project here." Such situations are more common than you might imagine, especially when constructing in sought-after areas with good schools and accessible utilities/services. Opting for a remote location may alleviate tax concerns, but you will still encounter challenges in securing power, water, and sewage.

4. The location is generally undesirable.

When it comes to land, location plays a crucial role. For instance, one acre available in location X is priced at $2,500, while the same size of land in location Y costs $2,500,000.

This situation is a common occurrence. I recall my experience of comparing sales data for properties in Arizona. Those situated far from the city center were selling for a mere one or two thousand dollars per acre. Conversely, properties that looked identical but were located just outside the city were selling for prices that were 1000 times higher and... selling much quicker.

The truth is, most land parcels are not situated near major urban areas. Instead, they are located significantly far away from civilization, which makes it more challenging to find the right buyer.

5. Banks are not providing loans.

Prior to the 2008 financial crisis, it was common for individuals to secure loans for purchasing land. During that period, land prices experienced a significant increase due to the easy availability of loans, making land more liquid and appealing to buyers. However, the situation has now changed.

Do you recall our earlier discussion in this article about the volatility associated with land? This volatility tends to discourage banks from providing loans. Consequently, individuals interested in buying land today must have substantial cash reserves. Alternatively, sellers may consider offering financing themselves. However, many sellers are reluctant to do so because, unlike banks that can lend money they don't possess and earn interest on it, sellers can only loan against the equity of the land. This means they would have to wait for years to receive the full sale price.

6. Real estate agents are indifferent.

It is a fact that the majority of agents, around 95%, are generally not very interested in selling land. While they may agree to list your land for sale, actively working to sell it is not their priority.

The reason for this is that real estate agents are more accustomed to selling properties worth hundreds of thousands of dollars in much shorter timeframes. As a result, most land sales are not as profitable for them, leading to minimal effort in marketing and describing the properties, making land hard to sell.

This is a common occurrence. When browsing through land listings on platforms like Zillow, you will notice that properties listed by agents often have brief descriptions of less than two sentences. On the other hand, for-sale-by-owner listings tend to have more detailed descriptions as owners invest more time in marketing their land.

In conclusion, unless you have a high-value property being sold by an agent specialized in land sales, most agents are likely to delay rather than expedite the sale of land.

7. Land is not considered attractive.

There are no TV shows that romanticize land flipping or property renovation. The major real estate gatherings focus solely on houses and apartments. The reality is that land isn't as appealing (unless you have a penchant for such gritty matters). This fact isn't inherently negative, but it does pose challenges when it comes to selling land.

Consider this: countless individuals fantasize about flipping houses and avidly watch TV programs that glorify this activity. As a result, many people are not only willing to purchase the homes they reside in but also to invest further and acquire additional properties. Unfortunately, the land market doesn't benefit from these popular trends, leading to a much smaller pool of potential buyers.