Three things are necessary to successfully market land for sale by owner: motivation, a willingness to do some work, and an understanding of how builders make their land buying decisions. By stepping inside the builder’s shoes, you can greatly increase the chances of selling your parcel.
When builders search for land parcels for development, they scrutinize them on three levels:
geographic or market; suitability; and economic feasibility. Some buyers search for vacant land by geographic area, based on the https://bubba-land.com/south-carolina/ locations of their projects, places where they have a comfort level from past experience, or municipalities in the path of future growth. Others search for land parcels based on the number of potential building lots or types of buyer markets they want to reach. These could include age group (e.g., first-time buyers, empty-nesters), price range (e.g., entry-level, luxury housing), and life or housing style (e.g., gated communities, townhouses).
However builders define their target land parcels, they have to sift through many properties before finding one or two sites worth pursuing. Then they evaluate the suitability of the property for their intended development. Issues that are investigated typically include the availability and accessibility of public utilities, the current zoning, and challenging physical features of the site such as floodplain, slopes, and wetlands.
Builders focus on five critical questions when they buy real estate for development:
What can I build?
How many can I build?
What can I sell them for?
How long will it take to sell them?
What are the costs?
Builders evaluate the property and analyze the deal in the context of these questions. As they obtain more information, the answers can change or even prompt additional research. What does not change is the builder’s focus on these threshold issues because they relate to the bottom line question: should I buy this property?
What Can I Build?
The builders start with the basics, identifying the type of housing permitted on the property under the current zoning, such as single family detached, row or townhouses, or twins.
How Many Can I Build?
The number of separate land parcels that can be subdivided from the property is a crucial part of the feasibility picture. The site yield that is estimated roughly in the initial stage of investigation will likely be modified to reflect information the builder obtains subsequently.
What Can I Sell Them For?
How Long Will It Take To Sell Them?
The value of the land is based in part on the sale value of the total package, that is, the new home on its lot. Tough experience has taught successful builders to be conservative in their projections of income and expense. They compile information on the sale prices, features and amenities of the new homes being built in the area. But they also track the rate at which the new homes are selling in these communities. This statistic enables the builders to determine a price range at which the home sites should sell at a steady pace. Time costs builders money in loan interest and they cannot pay off these loans and get their profits until they sell all of the homes in their development. The longer it takes to do this, the more they pay in interest. So the builder’s objective is to devise a realistic sale price for the total package.
What Are the Costs?
The other factor that impacts the value of vacant land is the expense builders will have to incur to transform the property into something that they can sell. These costs include the installation of horizontal improvements (such as streets, curbs, sidewalks, landscaping and grading) in addition to vertical improvements (building the houses), the purchase price and expenses for financing, marketing, engineering and other consultants.