Purchasing & Developing Land - Part 5 - Reselling It

Owning raw land has real potential along with its share of pitfalls. Whether you decide to hold it and sell when real property values climb or -- alternatively -- develop the lot to convey at a higher price, you are subject to forces of market, timing and competition. We have considered the acquisition of vacant land, financing that purchase; and complying with legal standards. In this last posting, we focus on the process and profitability of resale. Improved land has its promise but so do parcels left in their raw state. Success depends on when, where and how you sell.

Who Buys Raw Land?

While some purchase vacant property to build their dream house and later occupy it, many others see raw land as a profitable investment. The latter are often unsure of their plans for the property but understand the advantages of sitting on it for a time. If the lot is zoned for commercial use, they do well to develop it as a retail space or other business, and later serving as the landlord. By contrast, a homebuilder acquires raw land to build on and sell when home values are high. Motivation will determine the price paid for your land.

How to Market Raw Land

For those who see a profit in selling raw land to developers or other interested parties, getting the most money for the lot is attained through optimal marketing. First of all, sellers need to know who shops for vacant land, as noted above. Secondly, owners need to prepare the land just as a home seller needs to stage a house. Mow the grass, pick up litter and even plant wildflowers for aesthetic appeal. Having a detailed survey prepared demonstrates a desire to deal honestly with buyers. It also gives purchasers a clear picture of what they might be getting into.

Setting an asking price is complicated since too high a request can put prospective buyers off while lowballing the price may short the seller of receiving a fair exchange of value. Raw land has fewer properties with which to compare than does a developed parcel so other standards must be considered. Of course, the purchaser's plans for the land are factors in its market value. Thus, you want to find common ground between your own financial needs and the buyer's financial goals. Meanwhile, high-profile online presence is a must while offering seller financing is a plus.

How to Market Developed Land

Once the land is improved, marketing conforms to a more traditional model. A realtor sells houses -- yes, the land underneath and surrounding -- first and foremost. Property values are home values just as commercial property values center on the building. Appraisers can evaluate worth in relation to similar structures and sellers can base their asks on appraised market value. These structures are new so have the advantage of never having been occupied. Buyers purposes are clearer when a house or building stands at the site so sellers have more information when setting a price.

Things to Remember

Before conveying a raw or developed property to anyone, it is best to confirm that the lot is in full compliance with zoning and environmental regulations. Alternately, make no warranties or representations to the legal status of the land if there are unanswered questions in this regard. In addition, make sure to retain an experienced real estate attorney when transacting any land deal, even unimproved land. Old liens, ambiguous contracts and local government can throw wrenches into the sale. A good lawyer will see them coming.