By Jeff Boswell, Partner/Broker Associate, Republic Ranches
& Greg Fay, Broker/Owner, Fay Ranches
One of the most challenging aspects of selling your land is knowing how to price it. The process of selling land is more often derailed by poor pricing strategy than any other factor. Pricing land is not an exact science. It is fraught with subjectivity and emotion, and therefore inaccuracy. And by inaccuracy, we mean overpricing. In over 25 years of selling land, we can’t remember ever seeing land that was underpriced.
In addition to our own observations, we interviewed several successful land brokers and sellers and asked them for their opinions on the proper process to price land accurately. We also asked their opinions on strategies that most often result in the highest sale price for your land.
There was remarkable consistency in the comments we heard from both agents and sellers who had gone through the process of selling land. First and foremost: find an honest, competent and experienced land broker to help you value the land, and listen to them. There is nothing wrong with asking two or three recommended land brokers to provide a valuation. However, most landowners cannot help but fall into the trap of listing their land with the agent that gives them the highest valuation.
That agent is almost always your worst choice, for a couple of reasons. The most successful agents will provide accurate valuations because they have enough business that they don’t need to ‘buy the listing.’ Those agents invest a substantial amount of time, effort and money into marketing and selling the listing, so it is a waste of everyone’s time, effort and money if the land does not sell. Inflating the recommended list price to get the listing is a common practice amongst real estate agents. Falling into that trap is like hiring the builder who gives you the lowest bid. This strategy almost always turns into a nightmare and ends up costing you more money in the long run. It is extremely difficult for a landowner to turn away the agent that provides the highest valuation. If you can do this, you will sell your ranch for more money.
Real estate pricing 101 dictates that your land listing will never have as much interest as it does when you first put it on the market. You can only do this once. If you don’t take full advantage of this initial offering period, you will likely have a long road ahead of you, and will ultimately sell your land for less money than if you had priced it accurately from the start.
For land, this initial offer period is the first year the ranch is listed.
If you haven’t sold your land once it is over, you will inevitably enter a period of price reductions (if you still want to sell).
During the first year your land is listed and is new to the market, you have leverage as a seller if you have priced the land correctly. Potential buyers will believe that they will have competition for buying your ranch. Further, buyers of ranches can fall in love with a place and let emotion help the seller keep the price up. If they never come to see the ranch in the first place because it was overpriced, that opportunity is lost. If you have not correctly priced the ranch from the beginning, you may never have such a leverage again, and it is the eventual buyer who will.
At some point, your land will reach a price point at which the market decides it is a value. At this point, you will likely only have one interested party, because you’re not getting many showings. That potential buyer will low ball you. If you’re not interested in selling at their price, they’ll just back off and wait, because time is on their side.
You don’t get a ‘do over.’ You’ll never get another chance to introduce your land to the market. You can change the name of the listing, change companies, but the market knows. This scenario plays itself out over and over in the land market. We know several sellers who would love to go back in time and price their land accurately right out of the gate.
Part of the reason land so often ends up overpriced is that most landowners (including us) feel that their land is the best land there is. And for them, it is. Land is a very personal and emotional asset for many people. Every landowner can tell you why his/her land is better than his/her neighbors’ land. This is what makes land wonderful, but it is also what skews our perception of value when it comes time to sell.
If you find yourself overpriced, one of the most common and weakest selling strategies a seller can have is refusing to lower the price but saying they will consider all offers. Many times, these are otherwise accomplished businessmen and women who think this strategy is somehow in their best interest. But instead, they’ve just taken away any leverage they may have had. You are always better off lowering the price and generating interest.
The ranch market has changed substantially over the past 15 years. Land investors have more market information available to them and have become much more educated and, consequently, the need for accurate pricing has become more important.
The bottom line: if your goal is to sell your land for the most money possible, you must put your emotions aside, and get advice from knowledgeable land agents. Resist listing with the company that may be providing an inflated value just to get the listing, and price your land accurately from the outset to take advantage of the leverage you have as a seller during the first few months you have it on the market. It will work out much better in the long run.