Getting a fair price is most probably the first thing you want when buying land. You don’t want the seller to rip you off, no matter what the state of the land market is. Now, the challenge is knowing how to spot a good deal before making an offer on the property.
Yes, evaluating the price of land property is crucial to make a reasonable purchase decision. To that end, here are some tips for you to get a fair price on the land you want to buy.
Comparable properties are land properties that are similar to the one you’re hoping to purchase. A 1,000 square foot parcel of land with similar soil type and utilities (if there’s any) in the same area should be priced approximately the same as the one you want to buy.
It’s also crucial to compare the price of the land you’re planning to purchase with the different land properties in the area. Is your prospect 1,000 square foot land more costly than a 900 square foot property? Or is it more affordable than a slightly bigger land property?
Real estate agents have access to current listings, recently sold listings, and expired listings. So, ask your agent if you want to know the recently sold comps in the same neighborhood.
If you want to get the feel of the size and condition of similar land properties as the one you’re interested in, visit and inspect them yourself. Don’t forget to check the prices and compare them. Most land sellers will give reasonable prices similar to market comps to sell their land faster. Then, ask yourself if the one you’re considering is priced fairly.
Unsold comps are excellent benchmarks to know if the land you’re hoping to buy is reasonably priced. You have to keep in mind that your prospective property must not have the same price as the comparable properties taken off from market listings because they’re overpriced. If you see similar properties currently for sale, make sure that their prices are lower than those unsold comps.
You can look at the index for unsold land properties to get valuable information about the present supply and demand in the market. In this way, you’ll also know the timeline it takes for current listings to get sold and know the reasonable prices of the properties.
Land prices sometimes go up or down. In a buyer’s market, you can typically find a lot of affordable properties. On the other hand, overpricing is common in a seller’s market. That’s why it’s crucial to get updated with the current state of the land market to know whether it’s good to buy a property or not.
You should also check out the impact of the job market and mortgage interest rates on the economy because they can also influence land prices.
The expected development in the neighborhood can also affect the price of the land you’re planning to buy. If there’s a mall being constructed or any major public construction work being planned in the area, chances are land values will go up.
The fact that the seller is selling land without an agent means that he/she won’t have to pay any commission, which amounts to 2% to 3% of the property sale. Thus, the land price should be lower than those listed with the help of an agent.
Also, for-sale-by-owner land properties are commonly overpriced since no agent can advise the seller with the pricing. That’s why you should be wary when buying a for-sale-by-owner land property.
You need to know the art of negotiation to get a price that’s both reasonable for you and the seller. Some land sellers are willing to negotiate with the buyers, especially those who initially put a high price on their properties. Such land sellers are just testing the buyers whether they would bite that original price or bargain for a lower price.
However, you need to keep in mind that some sellers take offense when you make a lowball offer. So, you also need to be of sound judgment when negotiating.
Real estate agents are very helpful if you want to purchase fairly priced land. They have the knowledge and experience when dealing with land sellers. And they can advise you whether a property is good for you or not.
If ever you get a land mortgage (which is not very common for land purchases), your lender will inspect and appraise the property you’re considering to buy to ensure that they can obtain a reasonable amount of money back if the property forecloses.
When the result of the appraisal is significantly less than the price you’re offering, it means you may not be getting a good deal. In such cases, the lender won’t allow you to buy the land unless the seller lowers the price.
Sometimes following your gut feeling can help you in your decision. If you feel that you like the property, you can go ahead and purchase it even if its price is a bit higher than its market value. But if you don’t like the property, don’t risk buying it at a price that’s higher than its market value.
Just trust your instinct if you don’t have the opportunity or fail to follow the other tips mentioned above.
Setting your mind on the price is crucial when buying land. You need to know how to evaluate the value of the property to ensure that you’re getting a fair deal. Make sure to check out comps, study the market, and seek the expertise of a real estate agent for that purpose.