So You Got a Letter Offering to Buy Your Land? (Part 2)

In Part 1, “So You Got a Letter Offering to Buy Your Land?” I covered why these letters keep showing up in your mailbox, the difference between a direct cash buyer and a wholesaler, whether any of this is a scam, and what the earnest money deposit and closing timeframe can tell you about how serious the buyer is.

Here’s the short version if you missed it: most of these letters come from real businesses. What varies wildly from one envelope to the next is what they’ll pay, how they intend to close, and whether they plan to buy your land themselves or flip the contract to another investor.

In Part 2, we’ll get into how to research the buyer, how to figure out what your land is worth, why a cash offer usually comes in below retail, and how to decide between selling to a cash buyer, listing it on the market, or ignoring the letter altogether.

Researching the buyer

Before you sign ANYTHING – whatever you do: research your buyer.

A real land buyer will have a website that doesn’t look like a template, a Google Business Profile with real reviews from sellers (not generic five-star blurbs), a Better Business Bureau (BBB) listing, a phone number that a real person answers, and owners whose names show up on LinkedIn or in podcasts or press. Missing one of those isn’t the end of the world – but it all adds up to a picture of whether or not you can trust the person making the offer.

And read the reviews carefully. You want sellers describing what the closing experience felt like. Check the BBB profile for years in business and complaint history. Look the owners up by name. Real land buyers tend to build public reputations on purpose, because trust is how real businesses grow.

If the buyer is an LLC with no reviews, no named owners, and a Gmail contact, you have your answer.

What’s your land worth?

I’m sure my team gets tired of hearing me say it, but land is worth what someone will pay for it. It’s hard to value. There’s nothing quite like it, and compared to homes, there’s a real dearth of data.

A good place to start is the county or town tax assessor. They’re incentivized to know what your property is worth, because that’s how they collect revenue and pay the bills. Free, and easy to access. The catch is they’re often one to three years behind the market. In a down market, your assessed value can look a lot higher than anything you’d get.

A local land broker or agent can give you an opinion too, and sites like Redfin or Zillow can be useful. Don’t assume a parcel listed at $20K an acre is going to sell for that price. Look at sold listings, and pay attention to whether the price shown is the actual sale price, or just the last asking price – these are two very different things. “Disclosure” states put the actual sold price in the listing. “Non-disclosure” states, like Texas, do not. Oh – and one caveat with talking to a broker/agent: make sure the one you are talking with is good, and isn’t desperate to get your listing. You want someone who will tell you the hard truth on the value so they can actually sell it – instead of having it sit for months with no activity, only to break the news to you that it’s not worth nearly as much as they said.

Why will an offer from a direct cash buyer be lower?

Once you have an idea of the market, you need to realize that evaluating a cash offer is a different exercise. A cash buyer is almost always going to be paying less than what you can get by listing it on the market with an agent. Why? Two reasons: speed and ease (and certainty).

Listing land on the market has a lot of uncertainty involved – both with price and with the time it will take. I’ve had land listed go under contract within a week, but I’ve also had land sit on the market for more than 24 months.

You already know this, but land is a very different asset than a house. Most houses have a buyer pool built into it since everyone needs one – it’s much more of a “liquid” market – meaning, there are more buyers and sellers and there’s a lot more volume of transactions. Land is much more of an “illiquid” asset – meaning, if you’re in a cash crunch and need to sell it fast – it’s going to be a lot more difficult. There are just fewer buyers, and on average, it takes much longer to sell land than a house – often up to and more than a year.

That illiquidity, plus the carrying cost and uncertainty, is an expense the cash buyer absorbs. Cash offers on land are typically between 40% and 65% of retail for exactly that reason. And time for another one of my mantras I’m sure my team loves hearing – the more uncertainty there is in a deal, the more margin of safety we need. I may get hate for saying this, but a 50% offer on a correctly valued parcel isn’t a lowball. It’s the liquidity and uncertainty discount. A 20% offer is a lowball.

What you’re choosing between

A direct cash buyer, a wholesaler, or listing. Each one has different tradeoffs.

Listing on the Multiple Listing Service (MLS) is usually the slowest and most complex, but can get you the most if you’re willing to put in some work and can wait. One thing to factor in as well – you will typically pay 6 to 10 percent in agent commission, and also closing costs. The upside is that if you have time and you priced it right, you can get 85 to 100 percent of comparable retail value.

Direct cash buyers like my company, Haystack Land Company, move fast. Most can close in 25 to 45 days, put meaningful deposit money down with at least some of it going hard once due diligence ends, and pay somewhere in the 40 to 65 percent of retail range. The upside is that you can sell it as-is, and you pay no commission and no seller-side fees, and you know when the money is going to hit your account. What you give up is the gap between that price and what it might sell for at full retail.

Wholesalers look similar to a cash buyer from the outside, sometimes by design. The difference is they’re not buying it themselves. The process of trying to find another buyer to assign the contract to before the close is what stretches the closing window out to 90, 120, or 180 days. The quoted price might be 50 to 85 percent of retail. The kicker is the deal only closes if they find an end buyer. If they don’t, the contract dies and your property has been off the market for months. One caveat to this: a good wholesaler is going to make sure you know that they are trying to find a buyer – and they should be offering you a real, non-refundable deposit plus a higher price as a tradeoff.

The whole question comes down to how much you want to trade dollars for time and certainty.

Sell, counter, or ignore

Three options and any of them can be right depending on you and your situation.

If speed, certainty and ease matter more to you than getting top dollar – the direct cash buyer is a good option. It’s never a bad idea to counter. And better to ignore the letter altogether if the buyer doesn’t pass the research test or if you’re not ready or in a position to sell. An offer is information. Not a deadline.

The biggest mistake landowners make is treating the price on the letter as a take-it-or-leave-it offer. It almost never is. Most legitimate buyers expect counteroffers and will negotiate. If your information tells you that retail value is at $100K and a letter comes in at $45K, a counter in the $55-65K range will often get accepted.

Assuming you would like to sell – the second mistake is to assume there’s no cost to ignoring it. There very well may be. Property taxes don’t stop, and inherited or unwanted land has a way of drifting further from your priorities the longer it sits. If you’ve been meaning to sell and a credible offer shows up, the timing might end up doing you a favor. Make sure the decision is yours, not the letter’s.