Pros and Cons of Selling to a New York Land Company

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Pros and Cons of Selling to a New York Land Company
By

Bart Waldon

New York is a state full of opportunities, especially when it comes to real estate. With bustling cities like New York City, Buffalo, Rochester and Syracuse, as well as plenty of scenic rural areas, land is a hot commodity here. As the population continues to grow, the demand for land also rises.

That’s why more and more New York landowners are choosing to sell their vacant lots, acreages or other holdings to local land companies. These firms specialize in buying and selling land throughout the state.

If you have a piece of land in New York that you’ve considered selling, you may be weighing the pros and cons of working with a specialized local land company versus trying to sell it on your own or through a traditional real estate agent. Here are some of the key factors to consider from each perspective:

The Potential Advantages of Selling to a Land Company

1. Cash Offers Make for a Quick Sale

One of the biggest perks of selling to a reputable local land company is that they are able to make all-cash offers. This streamlines the process and makes it possible to finalize the sale more quickly versus waiting for a buyer to secure financing.

With a cash buyer, you can avoid frustrations such as the buyer’s loan falling through at the last minute. The land company has the funding ready, so once you accept their offer, closing can happen within a few weeks in most cases.

2. Land Companies Have Industry Experience

An established land company has specialized experience when it comes to properly valuing land parcels, drafting purchase contracts, navigating title issues and facilitating smooth closings. They handle land transactions day in and day out, so they know what typical timelines and terms look like.

As experts in buying and selling land, they know how to accurately assess factors that affect value, such as location, terrain, zoning, access to utilities and more. This expertise takes much of the guesswork out of arriving at a fair offer.

3. Less Hassle Than Selling Privately

Attempting to sell land on your own, such as by listing it on Craigslist or posting “for sale by owner” signs, takes considerable time and effort. You have to coordinate showings, vet potential buyers, handle negotiations and paperwork, and so on.

In contrast, dealing with a reputable land company simplifies this process. After you agree to terms, they handle closing logistics and legalities. They have systems in place to streamline the real estate transaction, saving you major hassle.

4. Companies Market Properties Extensively

Professional land companies invest tremendous resources into marketing and advertising land listings within their inventory. This exposes the property to exponentially more buyers than an individual seller could reach independently.

With its broader marketing reach, they are equipped to find buyers more efficiently. This makes it more likely your land will sell within their target 1-2 year timeline or often much sooner.

Potential Drawbacks of Selling Land to a Company

Of course, even when dealing with a professional land company, there are also some potential downsides or compromises to consider:

1. Commission Fees Apply

When you enlist a land company to represent your sale, you'll pay their commission fee, which is often 5-10% of the total sales price. This cuts into your final proceeds versus if you could find a direct buyer yourself.

However, this cost may be worthwhile given the expertise, efficiency and convenience offered by the land company compared to selling solo. But it's an extra expense to factor in.

2. Profit Margins May Be Lower

In order to turn around and resell a property at a profit, land companies need to negotiate a discounted purchase price. While their offers are based on careful market analysis and appraisals, they typically can't match full retail asking prices.

For some sellers, accepting a lower-than-desired offer price is unappealing. But often, the time and uncertainty saved by not listing it yourself or waiting years for the right buyer outweighs leaving some money on the table.

3. Less Control Over the Buyer

When you enlist a land company to represent the sale, they take over communication with buyers from there. Unlike a private “for sale by owner” scenario, you won't get to meet or vet buyers personally before closing.

While reputable companies do their due diligence on buyers' qualifications, some sellers are uncomfortable relinquishing this control over the buyer selection process. However, the land company's experience assessing buyers helps minimize risk.

4. Potential Tax Implications

If you sell land at a significantly higher price than your original purchase amount, capital gains taxes will apply. When you accept a land company's discounted offer, it lowers the taxable capital gain versus selling at full market retail value.

For some sellers, the smaller profit margin bumps them into a lower capital gains tax bracket. But if your profit still exceeds the threshold for your filing status, taxes could still make a sizable dent. Consulting a tax pro can provide more clarity around the impact in your specific situation.

Key Questions to Ask Prospective Land Buyers

If you're considering pitches from both land companies and individual buyers, here are some key questions to ask to make an informed decision:

What experience do you have buying and selling land in my geographic area? You want to verify they are very familiar with local land values, demand, zoning laws and other regulations. Local expertise is invaluable.

Do you have the funding lined up to close quickly with cash? Reputable buyers will have financing sources in place and be transparent about their ability to make a speedy, reliable cash offer without contingencies.

How do you verify property condition and values during your due diligence process? Their valuation methodology should go beyond just comps to factor in utilities, soils, topography and more. Press for specifics.

How long have you been in the land business? Look for companies with a longstanding local presence and track record over many years. The experience of veteran firms sets them apart.

Can you share some seller references I could contact? Speaking with other landowners who have sold to them can provide unbiased insight into their reputation and business practices.

What specific marketing channels will you use to resell my property? The wider the reach the better - online listings, print ads, staged open houses, targeted networking and more. Maximizing exposure is key.

Carefully vetting any potential buyer - whether an individual or a company - is wise to ensure you select a qualified partner for the sale. Keep the pros and cons in mind as you weigh offers. An experienced local land company can streamline the process tremendously while still fetching reasonable terms.

How to Choose the Right Land Company

When evaluating land companies to potentially work with, keep the following tips in mind:

Check their experience. An established track record buying and selling properties in your local area is essential. Ask how long they've been in business and request references from past sellers.

Verify their process. A reputable land company will have a systematic process for property valuation, marketing, sales and closings. Get specific details on the methods they use at each stage.

Look for fair terms. Cash offers are good, but make sure the price still reasonably aligns with market value based on location, condition, zoning and access. Don't sacrifice more than needed.

Review marketing reach. Maximizing exposure through diverse online and offline channels will yield the best offer price. Ask how they plan to promote your listing.

Request case studies. Success stories from other satisfied land sellers can give you confidence in their abilities. Reputable companies should readily share examples.

Doing due diligence will help you select a knowledgeable local land company that can make the sale process smooth, convenient and financially beneficial.

Final Thoughts

Selling vacant land or other real estate holdings can be a complicated endeavor. Working with an experienced local land company simplifies the process tremendously through their expertise, efficiency and marketing resources. Yet it’s wise to weigh the potential advantages against drawbacks like lower offers and commission fees. Overall, a reputable land firm with extensive knowledge of the New York market can help landowners mitigate the challenges of a private land sale to ensure a smooth transaction, reasonable terms and peace of mind. By asking key questions and doing due diligence, sellers can partner with the right buyer for their needs.

Frequently Asked Questions (FAQs)

What paperwork is involved when selling land to a company?

The land company will require you to sign a purchase contract outlining terms like price, closing date, contingencies, etc. You'll also need to supply a deed to transfer title and tax documents.

How long does it usually take to close when selling to a land company?

For cash sales, closing often happens within 30-60 days of an accepted offer. The land company handles the title search and other logistics to expedite closing.

Will I have to pay commission when I sell my land to a company?

Most land companies make money by buying properties below retail value. Their fees typically range from 5-10% of the purchase price.

How do land companies determine their offer prices?

They research similar land sales in the area and factor in the property's specific location, terrain, zoning potential, utilities access, etc. to make a fair cash offer.

What are the tax implications of selling land to a company?

You'll owe capital gains tax on the difference between purchase price and sales price. The company's discounted offer lowers your taxable capital gain versus a higher retail sale.

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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