Pros and Cons of Selling to a Virginia Land Company

Virginia's diverse landscape and natural resources make it an attractive state for land ownership and development. According to the Virginia Department of Forestry, approximately 62% of Virginia's land area is forested, covering 15.8 million acres. The average value of farmland in Virginia reached $4,700 per acre in 2022, as reported by the USDA National Agricultural Statistics Service. With such valuable land assets, many property owners in the Commonwealth face the decision of whether to sell their land to a Virginia land company. This choice comes with various advantages and disadvantages that warrant careful consideration. Understanding these pros and cons can help landowners make informed decisions about their property and financial future.

Overview of the Virginia Land Market

With over 42,000 square miles encompassing Appalachian mountains, coastal wetlands and fertile rolling hills, Virginia offers great geographic diversity. Both urban centers like Arlington County and rural farming communities thrive across the state. Virginia struck fortune in history, with Washington D.C. carved out of its territory and colonies like Jamestown playing pivotal early roles. This rich background lives on through preserved battlefields, plantations and other historic sites.

Given its varied topology and land history, property ownership remains an integral part of the Virginia experience. Around half the state is forest, with forestry and agriculture contributing $91 billion to the economy annually. The median home price is $300,000, while vacant rural land ranges from $5,000 to $10,000 per acre depending on location and attributes. Many Virginia families own 5-50+ acres of fields, forests or mountain land passed down for generations. For these folks, selling the land can make sense to simplify estate planning or generate needed income.

Pros of Using a Local Land Company

Selling your Virginia property directly to a specialized land buying company based in the area offers some potential upsides:

Quick Sale Turnaround Time

The main enticement of using a local land company is completing the sale quickly, often within 30 days or less. Firms like Smithfield Land Co. and First Dominion Land have funds on hand to buy land with cash, streamlining the closing process. This provides fast access to payment versus trying to find an individual buyer yourself across an unpredictable multi-year timeline.

Avoid Hassles and Headaches

Attempting a private "for sale by owner" process creates headaches such as listing the property, staging it, accommodating tours and inspections, fielding calls and emails, negotiating with potential buyers, and ultimately closing the sale with the chosen purchaser. This DIY approach involves substantial time and stress for the land seller. A land buying company eliminates these hassles by purchasing the land directly from you via a simple transaction.

Pay No Commissions

Using a real estate agent to sell land means paying typical commissions of 5-6% of the sale price. For a $200,000 rural property, that equals $10,000-12,000 out of your pocket. Selling to a land company involves no commissions or broker fees, saving you significant costs. They profit by reselling at higher retail later.

Receive Your Payment in Weeks

With a land company, you can often receive payment in full within weeks of finalizing the purchase contract. This provides immediate liquidity versus waiting through the traditionally longer escrow period of 30-60 days when selling the conventional MLS route. The quick cash is a major benefit for sellers who need funds urgently.

Sell As-Is

Land companies purchase rural land and other properties in their existing state or "as-is." For private sales, you may need to invest sweat equity prepping the land by clearing debris, removing dilapidated structures, trimming trees or doing repairs. Land buying firms accept the property as-is, saving you these headaches.

No Fees or Obligation for Quotes

When first contacting a prospective land buyer, you can request a free quote with no-obligation. Reputable companies will fully research your property's attributes and market comparables and provide a fair cash offer for your review. If you don't like the quoted amount, you can simply decline at no cost. They only earn a fee upon purchase.

Negotiation Experience

Employees at land buying organizations deal with property negotiations daily. They become experts on determining fair offer prices across different locations and land types. As an individual DIY seller, you likely have little experience haggling over land deals and may inadvertently leave money on the table or agree to a lower price than justified.

Example Scenario

For example, the Smith family in Richmond, VA owns 25 acres of rural land in Halifax County, passed down for three generations. The aging parents now want to gift the land proceeds to their children to assist with college expenses rather than leave the property directly. After contacting several area land companies, they received an all-cash offer of $165,000 from First Dominion Land. Given the family's goal to liquidate fast, this deal made the most sense versus trying to sell themselves over months or years. They completed the sale within 45 days and gifted the funds to their kids.

Cons of Using a Land Buying Company

Despite the benefits, some drawbacks also come with divesting your land to a local company rather than selling it yourself. Consider these potential cons:

Below Market Value Offer Price

Land companies seek to profit by buying low and selling high later on. So the offer you receive will likely be 10-30% under recent comparable sales prices in the open market. For sellers focused purely on maximizing profit, this discount off “retail value” can make DIY sale a better option despite the extra work. But others find the quick cash worth the trade-off.

Lost Future Appreciation

Upon selling to an institutional buyer, you also lose out on any future price appreciation if the land value increases more in subsequent years. Holding the asset longer yourself allows capturing more upside. This is especially true if the land has strong mineral rights, water resources or development potential once infrastructure arrives. Sellers should weigh forfeiting this upside against their need for immediate liquidity.

Potential Tax Implications

Certain tax implications may arise from selling land that could have been deferred or avoided by holding the property longer yourself and employing certain tax planning strategies. For land held as an investment, capital gains taxes can potentially be deferred by utilizing a 1031 exchange. For inherited land, the tax basis can be stepped up to the current value by holding until death. Consult a tax advisor to review implications.

Emotional Factors

For properties that have remained in families for decades or even centuries, divesting the land to an impersonal company rather than another family or farmer can feel like losing a piece of legacy. Land companies will likely parcel off and flip the land whereas other buyers may preserve its integrity long-term. For some, emotions outweigh economics.

Loss of Financial Security Blanket

After selling off all excess acreage, some regret the decision later if an emergency arises and the land value could have covered it. They lose this financial security blanket of being able to sell the land as a "rainy day" fallback plan in the future to fund retirement, medical bills or other large expenses if needed.

Key Tips for Maximizing Outcomes

If selling to a Virginia land company makes sense for your situation, keep these tips in mind:

• Talk to several buyers and compare offers to stimulate competition.
• Research reputation online and verify past customer reviews.
• Use a lawyer to review the contract before signing to protect your interests.
• Have property docs ready - deed, title, plat map, etc. to streamline diligence.
• Weigh tax implications to optimize after-tax net proceeds with a tax advisor.
• Sell only the portion you must at this time if possible, retaining some land.
• Add contingencies as needed to the contract, for example for zoning confirmation.
• Take time to negotiate if you aren't in a big rush, don't take the first offer.
• Keep emotions detached and make the decision analytically based on pros and cons for your situation.

Key Questions to Ask Potential Buyers

When meeting with land companies, ask these questions:

• How long have you purchased Virginia land properties? Look for 5+ years locally.
• Can I see online reviews from past sellers? Research Google, Facebook, and the Better Business Bureau.
• How does your offer price compare to current retail market value? They should provide comps.
• When will I receive the payment after closing? Expect 5-10 business days.
• Who handles title paperwork and document preparation? The company should manage it.
• What contingencies can I add to the purchase contract? For example, verifying acreage.
• What happens if I accept the offer but change my mind? You should be able to cancel for any reason during an inspection period.
• Is the offer all cash or subject to any financing terms? All cash is fastest and safest.

Final Thoughts

Selling land you've inherited or held for many years is often an emotionally complex decision with no "right" answer. Several pros and cons come with selling to a local land company versus attempting a private independent sale. For Virginians needing to liquidate land faster for financial reasons, land companies provide a simpler, more streamlined divestment process. Yet selling yourself yields the highest profit.

Carefully weigh the tradeoffs based on your personal financial picture, priorities and the land attributes. Involve trusted advisors to decide what path forward makes the most sense for your specific circumstances if you choose to sell your Virginia land.

Frequently Asked Questions (FAQs)

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

For an apples-to-apples comparison, ask the land company for recent sales of comparable properties in your county. Most will offer 10-30% below the retail fair market value. Enough to wholesale the land to their buyers at a profit, but still a fair cash price for quick sale.

How can I maximize the offer amount?

Contact multiple buyers and create competition. Highlight ways to build value - road frontage, water resources, mineral rights, etc. Get pre-sale improvements like clearly marking boundaries. Provide all documentation upfront. Negotiate with patience once they provide the initial offer.

What costs will I pay selling to a land company?

Minimal fees. The buyer covers title searches, document preparation, and closing costs. You may pay some nominal county recording fees like $20-$50. Much lower than the 4-6% commissions from selling with an agent.

How do I vet the reputation of a Virginia land buyer?

Search online for reviews on Google, Facebook, and the Better Business Bureau. Check state registrations. Confirm they have a physical office location. Ask for referrals. Use a lawyer to review the purchase contract before signing. Reputable buyers have nothing to hide.

What documents do I need to provide them when requesting an offer?

Initially, just the property address and your contact info. They'll research public records for acreage, parcel ID, vesting deed, title status, tax status, plat maps, etc. To accelerate the process, also provide any boundary surveys, title insurance you have, mineral/water rights data, disclosure of liens or easements.

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