Seven Reasons Land Is Hard To Sell

In this article I'm going to review seven reasons why it can be so darn hard to sell land. If you've ever tried to sell land, you know what I'm referring to. Land just does not sell as quickly as other investments like houses, gold, crypto, or stocks. Here's why..

1. Major value perception discrepancies

The land market is volatile. I mean, REALLY volatile. I learned this early in my land investing business when I was preparing to send offers to rural properties in LA County. Painstakingly, I manually comped hundreds of properties (thanks to LA County's excellent GIS) and here is the scenario I would consistently run into: Property X sold for $3,000. Property Y, which is identical to Property X, sold for $50,000.

The kicker: both properties were located next to each other and sold within the same year. Here's the reality with land: some people think their land is worth bazillions of dollars while others think it's worth... nothing. This wild discrepancy in perceived value between buyers and sellers leads to high levels of volatility. High levels of volatility means less buyers will agree with your pricing which makes it harder to sell land.

2. Liquidity sucks

So you want cash for your land and you want it now? Good luck. Land is the most highly illiquid form of real estate hands down. Meaning, you can't just SELL your property and get your money. It can take months or even years to find a buyer. This fact makes the land market even less attractive to potential buyers further compounding the difficulty of selling land. Contrast this with the housing market which in some cases people liquidate within days. Or the stock market with the ability to liquidate your entire portfolio within seconds. Now that's liquid!

3. Uninhabitable without significant costs, work, and risks

When you buy a home everything is approved and setup. You can move right in and start living! With land, however, you can't move in unless you plan on living in a hut you bought from REI. The truth is that building on land is very difficult. First, you must get approval from the county and obtain permits. Then you must determine how to get power, water, and sewage. Get any of the above steps wrong and your entire project is over or you must completely live off the grid in a mud hut.

To make matters worse, you may be subject to paying high amounts of taxes. I once met a construction company owner who had just build a house on a lot next to the one I was trying to purchase. What he told me shocked me: "Bart, I paid $37,000 just to get permission to build. Honestly, I will probably not build here again." This is more common than you think, especially when building in a desirable area with good schools and nearby utilities/services. Build in the boonies and you won't have this problem but you will have the issues of getting power, water, and sewage.

4. Location usually sucks

Location is everything with land. One acre for sale in location X: $2,500. One acre for sale in location Y: $2,500,000

I have seen the above scenario many times. I remember when I was analyzing comps for sold properties in Arizona. The properties that were hours from the city center would sell at only one or two thousand an acre. Identical looking properties right outside the city could sell 1000x higher in price and.... FASTER.

The reality is that most land is not located in and around major population centers. Instead, they are far, far away from normal civilization making the ideal buyer harder to find.

5. Banks aren't loaning

Before the 2008 market crash it was common for people to be able to get loans on land. In fact, land prices greatly inflated during this time since ease of loans made land more liquid and attractive to buyers. Now, not so much.

Remember when we discussed at the very beginning of this article the volatility of land? You see, volatility is a big turn off for banks. So, they don't loan. Now if someone wants to buy your land they need cash and lots of it. Or, you need to offer seller financing. Which, most sellers do not want because, unlike a bank that can loan and collect interest on money it doesn't have, you can only loan on the land's equity. Meaning, you must wait for years to get the full sale price.

6. Real estate agents don't care

It's true. Agents, in general, as in 95%, don't give a hoot and a holler about selling land. They will offer to sell your land, of course. But actually do work to sell it? No, that would be crazy!

Here's why: Real estate agents are accustomed to selling properties for hundreds of thousands of dollars and in much shorter periods of time. That means that the vast majority of land sales would be worth very little to real estate agents. This equates to most of them simply posting the property on the MLS and barely offering an acceptable description.

I see this ALL the time. Look up land for sale on websites like Zillow and you will find properties listed for sale by agents that have descriptions less than two sentences in length. Look at the FSBO and you will generally see people put in significantly more time

All of this is to say that agents are likely to slow land sales rather than speed them up unless you have a high dollar property being sold by an agent who specializes in land.

7. Land is not sexy

There are no TV shows glamorizing land flipping or fixing upping. The big real estate meetups are all for houses and apartments. The truth is: land is not sexy (unless you are into that dirty stuff). There is nothing inherently wrong with this fact. But it does make it harder to sell land.

Think about it: millions of people day dream about flipping homes and binge watch TV shows glamorizing such. This means millions of people are willing to not only buy the home they live in but also leverage more and buy additional homes. The land market misses out on these bigger trends and thus suffers from a much smaller buyer pool.

With all the difficulties that come with selling land, I am still an huge fan of buying and selling it. My business, after all, is literally called Land Boss. In a future article I will review why the disadvantages are precisely why I love being in this business..

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