The land market is vibrant right now, and multiple offer situations and bidding wars are becoming much more common. Buyers have to be ready to move fast. I have represented several land owners whose properties had been on the market for months with little to no activity, and out of nowhere, multiple buyers are interested at the same time. It is a positive trend that I hope continues for the foreseeable future.
When you are in a hot land market with a good property, it is in your best interest to keep negotiations moving forward. Here are a few tips you can follow to help make a deal or move on to the next prospect more quickly. These tips are not legal advice and you should always consult your attorney for advice on your particular situation.
- Be sure to put offers in writing. Once you find land for sale that you want to buy, the next step is to write an offer. Making an offer by phone or text is convenient, but oftentimes this method can result in misunderstandings or miscommunication. Have your agent prepare your offer on paper, or draft a Letter of Intent (LOI) that outlines the terms of what you want to offer. Putting your offer in writing is the best way to not be misunderstood.
- Don’t make open-ended offers. Putting a shot clock on your offer or counter-offer is one way to keep the negotiation moving along effectively. This is the amount of time the seller has to consider your offer before it expires. Generally, 24-72 hours is a sufficient amount of time to allow for a response to an offer or counter-offer. When written into a contract, this clause will typically read like: “Buyer requests a response to this offer from the Seller by Friday, October 1, 2021 at 5:00 pm EST. This offer will expire at such time.” This wording makes it very clear how long this offer is good for, as it is not wise to leave an offer “hanging out there” indefinitely.
- Manage from Contract to Close. The most crucial part of the whole real estate transaction is what happens from the time a contract is executed until the parties sit down at the closing table. There are often contingencies such as surveys, percolation tests, home inspections, or loan approval deadlines. A real estate broker earns their money by keeping everything moving forward in the contract period. It is imperative to have close communication between buyer and seller (or their agents), along with lenders and lawyers. Everyone has a role to play, and the agent is the one keeping everyone on task.
- Avoid contract extensions. Many obstacles can come up during a land transaction causing the buyer or seller to request a contract extension. Whether or not it should be granted depends on what’s causing the delay. Can the situation be rectified easily or is it something complicated that may never be rectified? It is my opinion that contract extensions should be avoided if at all possible. Although I could give many examples that illustrate the importance of that last sentence, I will simply state that I feel extensions are generally not a good idea.
A “time is of the essence” clause is found in real estate contracts and provides that all parties to the agreement must be ready, willing, and able to close by a specified date and time. It conveys the importance of making and/or responding to an offer in a timely manner. Keeping a land purchase moving on a positive trajectory involves good communication, observing contract deadlines, and everyone doing what they agreed to do. A good land broker will help facilitate the transaction, identify potential pitfalls, and work with lenders and attorneys to remove any impediments to a successful close.
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