Pros and Cons of Selling to a Massachusetts Land Company

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Pros and Cons of Selling to a Massachusetts Land Company
By

Bart Waldon

If you own vacant land in Massachusetts and are thinking about selling, you may be considering offers from local land companies. These real estate firms focus on buying and selling undeveloped land across the state. Selling directly to a land company can provide a quick and straightforward exit, but also has downsides compared to listing your property on the open market. In this article, we’ll explore the key pros and cons of selling land to a Massachusetts company so you can make an informed decision.

Navigating the Market for Massachusetts Land

First, let’s set the scene on the Massachusetts land market. The state contains diverse terrain, from the beaches of Cape Cod to the forests of Western MA. Private landowners hold much of this property along with significant public lands. There’s an active market for buying and selling vacant plots driven by demand for development, agriculture, recreation, and investment.

For landowners, the process of selling vacant land independently can be a painstaking journey. It might take upwards of 1-2 years to find a buyer willing to pay your price. In that time, you’d handle advertising the property, showing it to prospective buyers, negotiating deals (that often fall through), and navigating contracts, surveys, title work, legal filings, and taxes.

After months or years invested, many owners end up extremely frustrated. They just want a straightforward exit strategy. Enter the land company, which promises a quick sale and cash in hand. But you’re also likely to sell at a discount. Let’s delve into this further.

The Appeal of Land Companies – Why Choose This Route?

Speed - The number one reason sellers choose to work with local land companies is the promise of a fast sale, often within weeks of initial contact. For example, a firm like Land Boss aims to make an offer within days of your inquiry call or property submission. If you accept, they can close within weeks since there's no need to find financing on the buyer side.

Avoid Hassles - You skip the headaches that come with traditional sales - no need to place ads, plant signs, show the property, screen potential buyers, negotiate deals, or chase closing. The land company handles everything from offer to closing.

No Commissions - Typically you’d pay your real estate agent 5-10% commission at closing. But selling to a land company means zero commissions, so you net more cash.

Sell As-Is - Unlike finicky retail buyers, companies buy land as-is, regardless of condition. Don’t waste time prepping land that may take ages to sell anyway.

Resolve Issues - Land problems like liens, back taxes, title issues can be resolved by a company, unlike retail sales.

Liquidate Inherited Land - Heirs stuck with unwanted inherited property can quickly liquidate through a company. No need to hang onto land for years.

Cash Out Refinancing Alternative - Companies buy for cash without you taking on debt.

Potential Downsides of Land Company Sales

Of course, there are some potential cons with selling to a land company as well:

Below Market Price - The tradeoff for speed and convenience is accepting a lower price than listing retail. Land companies need room to profit. You leave money on the table.

Tax Implications - If your tax basis is low, selling under market could trigger capital gains taxes. Consult a CPA to understand tax impacts.

No Future Appreciation - By selling now, you lose out on increased land value in the future. But the opposite is also true if values decline. It's a gamble either way.

No Ongoing Income - Unlike scenarios like seller financing, you don’t collect ongoing income from the land company after sale.

Local Reputation - Some see companies as snatching up land on the cheap. Make sure any potential buyer is ethical with satisfied sellers in their history.

Loss of Control - Once sold, the land company controls the property. No option for leasebacks, delayed sales, etc.

As you weigh options, keep the following tips in mind when evaluating the pros and cons:

Key Tips for Weighing the Pros and Cons

  • Consult an attorney to review any offers and sales agreements to protect your interests. Don't sign binding contracts without legal review.
  • Understand tax implications by speaking with a tax professional about capital gains, losses, and other impacts.
  • Vet potential buyers thoroughly by researching online reviews, complaints, lawsuits, and talking to references. Only work with established, ethical companies.
  • Compare options by speaking to multiple potential buyers - land companies as well as open market listings through an agent.
  • Calculate bottom line for each scenario accounting for taxes, commissions, timeline, and ownership costs.
  • Trust your gut during discussions and don't accept offers that don't feel right, but also be realistic about timelines.
  • See if negotiating is an option if the initial offer seems low. Some companies may be willing to negotiate.
  • Know your timeline/needs - If needing cash fast, a company sale may be worth lower price. If not rushed, listing retail may make sense.

What Questions Will Land Companies Ask You?

Reputable land companies will ask you some key questions before making an offer:

  • How long have you owned the land and what was the original purchase date/price?
  • Can you provide the parcel ID number and acreage details?
  • Are there any easements, rights of way, liens, or other encumbrances?
  • Why are you selling the property? What factors are motivating you to sell?
  • Have you obtained legal permission or entitlements for development, zoning, subdivision, or usage such as permits?
  • Can you provide property documentation like the deed, title report, survey, or tax records?

Having clear and accurate answers shows you have a solid understanding of the property details and status. This allows the company to properly assess and value your land.

Questions to Ask the Land Company

As the seller, you should also ask questions of the potential buyer:

  • How long have you been in the land business? Can you describe your typical process?
  • Can you provide seller references I can contact to ask about their experience?
  • What percentage of market value do you typically offer sellers?
  • Are there any additional fees beyond the purchase price?
  • How quickly can you close once an offer is accepted?
  • How do you assess and determine the pricing you offer sellers? What factors and data do you evaluate?
  • What happens if I accept your offer but a higher offer materializes - can I change my mind?

Again, reputable companies will have clear and direct answers. Push back if you feel responses are vague or evasive.

Conduct Due Diligence Before Selling

Before finalizing any land sale (not just with companies), conduct thorough due diligence:

  • Search online for in-depth info on the buyer, including reviews, complaints, and interviews.
  • Verify accreditations like BBB and licensing to confirm they are a registered business in good standing.
  • Do background checks on the company's owners and leadership team via online records.
  • Check court records for lawsuits, judgments, or other legal issues filed against the company.
  • Confirm tax compliance to ensure the company is up to date on taxes.
  • Request and call references to ask previous sellers about their experiences.
  • Carefully review contracts before signing anything binding. Have your lawyer review.
  • Take your time - don't let a buyer pressure you into rushing the process before fully comfortable.

Making the Best Decision for You

Ultimately whether selling to a local land company makes sense comes down to your specific parcel, personal financial situation, and risk tolerance. It's a very individual decision. Try to remove the emotion and honestly evaluate the pros and cons for your scenario.

Often sellers want top dollar but also a quick and easy exit. The right local company, making fair market offers, can potentially provide the best of both worlds. But if your gut tells you something feels off, don't be afraid to walk away from offers and keep exploring your options.

With the right guidance and considerations, selling land to a reputable local company can be a win-win satisfying both the buyer and seller. Just make sure to educate yourself on the process, know the market, vet the potential buyer, negotiate where possible, and trust your instincts along the way.

Frequently Asked Questions (FAQs)

What percentage below market value will a land company typically offer?

There's no single rule of thumb, as it depends on factors like market conditions and the specifics of your parcel. But offers from land companies generally range from 70-85% of estimated retail value. They need room to make a profit when reselling. A company making an offer at 50% of market value is likely either lowballing you or significantly overestimating potential resale value.

Should I negotiate the initial offer or accept as-is?

It never hurts to counter and see if the company will come up a bit in price. They may have some wiggle room built into their initial offer. However, don't go overboard in negotiations and risk losing the deal over trying to squeeze out every last dollar. Land companies can't pay full retail prices. Know when to compromise.

How can I estimate what my land might be worth on the open market?

Research prices for recent land sales in your immediate area and for similar parcels. Adjust based on factors like road access, terrain, zoning, utilities, and land use trends. Consider hiring an independent appraiser for an unbiased market valuation. This gives you a starting benchmark to assess wholesale offers.

Are there tax implications if I sell below market price?

Potentially yes, if you have a low cost basis and the sale triggers capital gains taxes. To understand possible tax impacts, review your cost basis (what you paid originally + improvements) and consult a CPA. Taxes don't make selling a bad idea, but it's ideal to make informed decisions.

What happens if I accept an offer but then a higher one materializes?

That depends on the contract terms. Most land company purchase agreements allow 7-10 days for you to back out penalty free if a better deal surfaces. Just don't go shopping the deal around to attract higher bids. Work in good faith with the original buyer. Be transparent about any new offers that come in.

About The Author

Bart Waldon

Bart, co-founder of Land Boss with wife Dallas Waldon, boasts over half a decade in real estate. With 100+ successful land transactions nationwide, his expertise and hands-on approach solidify Land Boss as a leading player in land investment.

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