October 27, 2008 by LandThink
In Upstate, SC land prices are still up…and will probably stay there.
There appears to be little impetus driving sellers to reduce prices despite weak demand for certain types of land. To the contrary unstable stock prices will drive land values higher as investors become convinced that land offers more security.
Why are land sellers holding their ground while house sellers sink?
Much has to do with the underlying mortgage…or lack of one. Hardly any of our current land listings are mortgaged. On the other hand, the entire housing meltdown is attributable to bad lending practices and mortgage pressure on homeowners.
Even mortgaged land differs substantially. Banks have always been conservative when it comes to land loans with 60% to 75% loan to value being the norm. Without political pressure on lenders to make everyone a landowner, credit qualifications were valid and borrowers actually paid a down payment along with closing costs. In short, most of the people financing land are monetarily committed to the deal.
There are many types of land and a few are currently down. Commercial sites and high-density development sites may be stagnant for quite some time. The development market flourished while being driven by ambitious developers and a huge demand for building lots. Quite a few of these developers are now holding overvalued tracts with an accompanying debt load. When you factor in huge increases to infrastructure costs due to asphalt, pipe, concrete and storm-water control, it will be difficult to justify building out these projects anytime soon …even if there were builders wanting to buy the lots.
Recreational and timberland tracts are in demand… if you can find someone willing to sell at a fair price. The timber industry controlled much of this type land until divestitures began taking place over the past several years. This move took thousands of acres out of availability for public hunting and private hunting leases. These tracts, particularly ones with merchantable timber, are great investments that outperform even a good stock market. Ponds, lakes and river frontage further add to the value of recreational land. If you are paying a timber value, confirm that value by employing the services of a qualified forestry consultant who will conduct a “timber cruise”.
Security and privacy is on everyone’s mind and private, gated communities in the country are popular. To comply with county regulations and in some cases qualify for agricultural use, these type developments usually contain parcels in the five acre and up range. Many are complete with amenities such as equestrian facilities, common areas and walking trails. A local project we are releasing within the next month has only 25 owners sharing the use of nearly 300 acres.
Estate tracts in the ten and up acre range will continue to be in demand. We “baby boomers” all want our place in the country and these sites are gradually becoming scarce. Eye appeal is critical as these purchases are often spontaneous. Check applicable regulations for maintaining agricultural use property tax exemptions. Occasionally buying an extra acre can mean the difference between $15.00 per year in property taxes and $1,500.00 per year.
Are you serious about selling your land in today’s market?
If you are a serious seller there are a few things you can do that will immediately set your property apart from much of the competition. The first thing is have an accurate survey and know exactly what you are trying to sell. Next, increase the aesthetic appeal by rotor mowing and clearing out roadbeds. Take care of areas that are showing neglect. You don’t want the buyer to factor in clean-up expense. If you are leasing hunting rights, put the lessee on notice that the property is on the market and to expect visitors. Likewise, advise your broker to stay out during early morning and late afternoon. Hunters and prospective buyers are a bad mix.
To bring an optimum price, land must physically appeal to a buyer and be easily accessible. Fall and early winter offer your best chance to prepare land for marketing. Always be mindful of the fact that land is bought with discretionary income and no one is compelled to buy it.
Consider financing the sale. Banks are tight and many buyers prefer not to tie up lines of credit. Owner financing was popular at one time and I see it coming back. Interest returns are usually better than savings accounts and offering financing will help you obtain a higher price. Make sure the buyer is financially committed and have your attorney either prepare the buyers note and mortgage or at least review it.
Employ the services of a qualified land broker. Just as there are vast differences between the housing market and the land market, there are vast differences in land specialists and residential real estate agents. Seek out a specialist, such as an Accredited Land Consultant, accredited by the Realtors Land Institute, a branch of the National Association of Realtors.