Pros and Cons of Selling to a Michigan Land Company

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Pros and Cons of Selling to a Michigan Land Company
By

Bart Waldon

If you own vacant land in Michigan, you may be considering your options for selling it. One potential route is to sell directly to a local land company that specializes in buying and selling properties in the state. Selling to a Michigan land company has some enticing benefits but also downsides to weigh. In this guide, we’ll explore the key pros and cons of this approach to help inform your decision.

Why Sell to a Land Company?

Before diving into the specific upsides and drawbacks, it helps to understand why selling directly to a land company may appeal to some landowners in Michigan. There are a few key reasons owners consider this route:

Speed and Certainty - Land companies can buy properties significantly faster than listing on the open market. Their all-cash offers provide certainty without the hassles of financing or inspections.

Maximize Land Value - While land companies pay below retail pricing, their offers may exceed the raw land value for rural or undevelopable parcels.

Avoid Hassles - Land companies handle all the paperwork, documentation, and closing. Owners avoid the headaches of DIY selling.

Sell “As-Is” - Companies buy land in as-is condition, defects and all. Owners skip potentially costly improvements.

Exit Quickly - Some owners inherit unwanted land or need a quick exit for financial reasons. Land companies provide a fast exit strategy.

Retiring - Older owners looking to retire and liquidate assets may prefer the simplicity of selling to a land company.

Now let's take a detailed look at the notable pros and cons of selling your land to a company rather than through traditional listings.

Key Pros of Selling to a Land Company

1. Fast Purchase Process

Selling a property yourself or using an agent can take months or even years, especially for rural land parcels. Land companies, however, have the motivation and resources to buy properties quickly. They have funds readily available for purchases and lean operationally to close deals fast.

For example, a company like Land Boss can make an initial purchase offer within days of receiving information on a property. If the offer is accepted, they can close within a few weeks as they handle all the title work and paperwork internally with their own title company. There's no waiting on buyers to get financing or inspections done.

This accelerated purchase process gets owners their payout faster. For those needing to liquidate assets quickly, such as settling estates, this speed and efficiency is highly appealing.

2. Certainty of Sale

When you list a property on the open market, nothing is guaranteed. It may sit for months or years with no serious offers. And if you do get offers, the buyer could back out at any time if they get cold feet or can't get financing.

Selling to a land company provides certainty right from the initial cash offer. You don't have to wonder if it will sell or not. The company has already done their due diligence on the property and is prepared to buy it. These are cash purchases with no buyer financing to complicate or delay the process.

Owners who value the assurance of sale over maximizing the sale price may prefer the guarantee of a land company purchase.

3. Company Handles All Documentation

Selling land on your own or via agents requires handling mounds of paperwork, disclosures, and documentation. This includes:

  • Title documentation
  • Survey/plat maps
  • Property disclosures
  • Mineral/water rights documentation
  • Easement documentation
  • Home inspection reports (for improved properties)
  • Tax documents
  • HOA documents

For someone inexperienced with real estate sales, this can be complex and confusing. Land companies have dedicated staff to handle everything. After signing the initial purchase contract, owners are hands-off for the rest of the transaction.

4. No Marketing or Negotiations

Similar to the paperwork factor, land companies also handle the entire sales process. Owners don't have to come up with pricing, market the property, stage it for showings, or negotiate with potential buyers.

The company makes an offer based on their valuation. From there, it's a simple yes or no decision for the owner with no protracted negotiations. Marketing and haggling over offers is exhausting for many sellers. With a land company purchase, the effort required is minimal.

5. Sell in “As-Is” Condition

Land companies buy properties in as-is condition, defects and all. If a parcel has damaged roads, no utilities, drainage issues, liens, or other problems, the company takes it as it is.

Owners avoid the potential expense of improvements, repairs, or clearing title issues before selling. Land companies have the expertise to resolve defects down the road if needed to develop or resell the parcel.

This allows owners to liquidate problematic properties they may have struggled to sell conventionally. It removes the barriers to exit if a property has substantial issues.

6. No Physical Presence Required

For owners who've relocated away from their Michigan property, selling remotely can be difficult. Attending showings, inspections, and the closing may not be feasible if you've moved out of state.

Selling to a local land company means no physical presence is required after the initial property tour. The entire sales process can be handled remotely via email, phone, and digital document signing. This convenient hands-off approach appeals to remote and relocated owners.

7. Typically All Cash, No Financing Contingencies

When buyers purchase through traditional financing, their offer will be contingent on securing a mortgage. If their financing falls through, so does the sale. All-cash offers from land companies remove this uncertainty.

Land companies also often pay all closing costs and fees at closing. The owner simply deposits their net check. There are no last-minute fees or costs owed.

For those desiring the quickest, cleanest exit, the simplicity and certainty of a cash-only closing is advantageous.

Potential Cons of Selling to a Land Company

Selling to a Michigan land company also comes with some potential drawbacks to consider:

1. Below Market Value Purchase Offer

The biggest trade-off is that a land company will purchase the property at wholesale pricing, well below full retail market value. For example, companies like Land Boss aim to buy properties at a discount of around 50% or more compared to potential retail prices.

For rural or undevelopable land, the offer still may exceed actual market value. But those with prime parcels near growing areas likely take the largest hit to potential value. Owners must weigh the convenience and speed against leaving money on the table.

2. Loss of Potential Appreciation

Similarly, selling to a land company means losing out on the potential for future price appreciation if the property is in an area becoming more desirable. Turning around and quickly reselling a parcel at full retail pricing is the land company’s business model.

By selling to them at a discount upfront, owners lose the potential value gains down the road. Conservative owners who prefer locking in a set return may not mind sacrificing the upside. But it could be a tough pill for optimistic owners to swallow.

3. No Long Term Income Potential

Some land, such as farmland or timberland, offers ongoing income generation potential through leasing or harvesting renewable resources. Selling the land outright to a company permanently foregoes this potential revenue stream.

Those seeing their land as a “use asset” rather than purely an investment thus may hesitate to sell to a company. The loss of long term income options has to be weighed carefully.

4. Tax Implications

The tax implications of an outright land sale must also be considered. In some cases, the capital gains hit from liquidating a property can be significant. It may be smarter tax-wise to execute a 1031 exchange into another like-kind property if possible, for example.

Compared to a slower sale via traditional listings, selling to a land company provides all cash upfront to meet tax obligations. But savvy owners should still consult their accountant or advisor to minimize taxes.

5. No Future Control

Once you sell your land to a company, that’s generally the end of your involvement. Unlike selling to an end-user buyer, you won’t necessarily know how the property gets utilized down the road.

For some owners, not knowing the land’s destiny or being able to have any say is concerning. Of course, this uncertainty exists any time you sell land. But companies explicitly buy land for future resale, so the long term plans are inherently undefined.

6. Have to Move at the Company’s Pace

A reputable land company will make an offer promptly after assessing a property. However, depending on their current pipeline, it may take weeks or months to get an initial offer in the first place.

Unlike listing on the open market yourself, the timeline is in the company’s hands. For those in a rush to sell, having to wait on the buyer’s timetable can be frustrating.

In summary, there are reasonable pros and cons to assess when considering selling your vacant land to a local company. The positives of speed, simplicity, and certainty entice many owners. But these benefits come at the expense of maximizing financial return.

Tips for Successfully Selling Your Land to a Company

If you decide to sell to a Michigan land company, keep these tips in mind to maximize your experience:

  • Get quotes from multiple companies to create competition and ensure you get the best price.
  • Thoroughly vet the company by researching online reviews and requesting references from past sellers.
  • Consult professionals like lawyers and accountants to protect your interests in the transaction.
  • Clearly disclose all property defects, easements, restrictions, etc. early in the process so there are no surprises.
  • Negotiate terms like closing dates if needed to accommodate your needs.
  • Double check closing figures to avoid any errors shortchanging your payment.
  • Maintain records of all correspondence and paperwork in case future questions arise.

Final Thoughts

Selling vacant land you own in Michigan to a local land company has definite advantages and disadvantages to consider. The quick and simple sale comes with receiving below market value. But for some owners, the speed and convenience outweighs leaving money on the table.

Carefully assess your own motivations, constraints, and priorities before deciding on the best path forward. If maximizing the sale price trumps all else, a land company may not be the best fit. But if you prioritize convenience and certainty, selling to a company like Land Boss could be an excellent solution.

Frequently Asked Questions (FAQs)

How much below market value will a land company offer pay?

Land companies typically offer around 50% or more below the retail market value of a property. However, the discount varies based on factors like parcel size, location, developability, and market conditions. Less desirable rural land may only see a 10-20% discount, while prime development land could see 70%+ off retail pricing.

How long does the process take to sell to a land company?

From first contact to closing, selling to a land company usually takes 4-8 weeks. The major steps are: initial consultation, due diligence research, formal offer, acceptance, and closing. Reputable companies can make an offer within days then close within weeks of acceptance.

What fees will I pay when selling to a land company?

Most land companies cover all closing costs, so the seller pays no title fees, recording fees, or transfer taxes. You simply pay any legal/advisory fees you incur. Some companies may charge admin or due diligence fees upfront, so ask about any costs.

What information do I need to provide about my property?

Land companies will request basic info like acreage, parcel number, property lines, easements/restrictions, improvements, access roads, and any known defects. They use this to assess fair market value. Providing details upfront speeds the process.

What steps should I take before selling to a land company?

Talk to tax/legal advisors, get a title search done, have the land surveyed if needed, verify precise acreage, research easements, and disclose any issues early. Taking these steps helps ensure a smooth sale process.

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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