Every buyer wants to get a good deal on their land. However, many struggle when trying to sort out what exactly it is that constitutes a fair price.
One of the most important factors in the purchase of land is determining what makes a fair asking price and a fair offer – one that is more likely to be accepted. When you’re buying anything, you want to be as informed as possible. So, to prevent having regrets, here are some tips to keep in mind when you’re ready to make an offer on that great piece of land you just found after months of searching.
Factor in the Specifics
Balance your opinion of “fair price” with the understanding that when it comes to land, “fair” has a wide range. On the one hand, be sure to look at real world data (comp sales) so you don’t pay too much or conversely, have an unrealistically low price expectation. A comparable sale (also known as a “comp”) is a recently sold property in the area with similar features to the one you’re looking to buy. But, on the other hand, use this information loosely, as a general guide. The reason is that with rural land prices, nearly identical properties can sell in a surprisingly broad range of value. The comps should give you a range of what’s acceptable to offer in the current market.
The 20% Rule
The high and low end of this range may be 15% to 20% apart with both ends considered “fair”. Only you can say what you should pay for a property. But, our experience is that it can be “penny-wise and pound-foolish” to let a 5% or 10% difference in positions cause you to lose a property you love and that otherwise meets your criteria.
“Fair” vs “Price to Own”
No one wants to pay too much, so do your homework and look at comps. Negotiate hard. But, at the end of the day, there is “fair price”, and there is “what it takes to own it”. Step back and take an objective look. The difference can look insignificant when viewed from the satisfaction of owning a great property. Sometimes getting a fair deal isn’t just about the numbers. Sometimes it’s about securing the property of your dreams. If you really want the land and can see yourself owning and enjoying it for the foreseeable future, it makes sense for you to put your best foot forward when making an offer. However, if you’re lukewarm on the property, you have more freedom to try to score a deal.
If you are not into a property, the price will never appear fair. Even if you get a bargain. On the other hand, if you give a little over market value for a property you love, you will not really care in the end.
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