Divide to Sell?

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Is it a good idea to divide your rural property to help it sell? Each property should be evaluated on a case by case basis to determine if a division will help the owner make the sell.

In the past month I have made recommendations to two different land owners about whether they should offer their properties as a whole or divide them and market them separately. Both tracts share many similar qualities: each has state highway frontage, a cabin, a lake, and they both join the national forest. In my property evaluation and marketing proposal I suggested that one owner divide his property and the other I recommended that he offer it in its entirety.

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The decision about whether to offer your property in multiple tracts or to sell it in its entirety should be made based on what your objectives are in selling the property. Is your goal to generate some immediate revenue? Perhaps your goal is to liquidate an asset that is in another state so as to remove all liabilities associated with it. Do you want to get the highest possible price for a property no matter how long it takes, or do you simply want to dissolve a partnership quickly and move on with your life?

Here are some considerations I take into account when advising clients about dividing the tract:

Here is when I would consider dividing the property:

  1. If you want to maximize returns on the property and the number of days on the market is not really a consideration.
  2. The property is large, and offering smaller parcels increases the potential buyer pool. (Because there are more buyers that can afford a $50,000 tract than a $500,000 property.)
  3. You need to generate some revenue quickly, and the odds of selling a small parcel are good.
  4. There is a market for mini-farms or small estates that would justify breaking your tract up.
  5. An adjoining owner wants a portion of the property and brings a bag of cash.

I would advise against dividing a property for selling it if:

  1. One of the divided parcels would be a liability or would be unlikely to sell if the more desirable piece is sold first. (Then you may be stuck with a “dog” forever.) Use the good tract as leverage to make someone buy the undesirable one too.
  2. The costs associated with closing a small parcel of land are not justified by the sell price.
  3. By dividing your land, the piece you sell adversely affects the property you are going to keep. (ie.. lose road frontage, increased cost to connect to utilities, lose farming capabilities, give up access to a water feature, etc…)

When considering how to divide a property, these are things I generally look for when making a recommendation:

  1. Natural divisions such as creeks, canyons, fields, forests, and other topographical features that would make a dividing point?
  2. Logical divisions such as roads, fence lines, fire lanes, varying ages of timber stands.
  3. Surveyed boundaries

A few other things to consider would include the costs associated with dividing it. A survey can be expensive as well as closing costs and real estate fees. Make sure you examine the estimated net sheet closely before agreeing to divide and sell.

Also we are seeing an unusual trend in recent months in rural properties, particularly timberland tracts, where large parcels (1000+ acres) are selling at higher per acre prices than 100 acre tracts. This is the opposite of the Sam’s Club effect we are all used to when buying things in bulk. We assume that we will pay more for a smaller quantity and that buying in bulk gets us a discount. That is not always true in rural real estate at present.

I hope these tips are helpful when considering whether to divide your property or not when putting them on the market. The decision can really only be made based on your objectives and the features of your property. I would welcome feedback and advice from other agents as to how they advise their clients on dividing their tracts.

About Author

Jonathan is a professional land agent with AlaLandCo, serving the historic Black Belt of west Alabama. He is a member of the national and Alabama chapters of the Realtor's Land Institute (RLI), and the only real estate agent in Perry County that focuses completely on rural land sales.

3 Comments

  1. Great analysis, spot on. There seems to be more people looking in the 20 – 50 acres than >1,000 acres (affordability). There is one exception, there are very few very large tracts (inventory). If you have a buyer, say doing a 1031 exchange, he may have a hard time finding a large tract. Recently there was a 637 acre tract in west central Georgia that sold for $2,750 per acre about $750 per acre over average county prices, why? limited inventory. One strategy might be, put the property up for sale, then after a per-determined amount of time, divide and sale !!

  2. Great Article Jonathan…and absolutely dead-on. One thing I would mention. There are times when you can divide to sell more quickly. If you divide a 30-acre property into three properties because your market absorbs 10-acre properties faster, or you divide a $150,000 property into $50,000 properties for the same reason, you may sell three properties more quickly than one.

  3. Kent- that is a great point about limited inventory on quality properties with large acreage. Good advice.

    Robert- you’re right about the absorption rate helping you determine how to best market the property. That is a good word to land sellers.

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