Have you received an offer for your land? It's kinda cool, someone wants to send you cash for your property, but darn, that price seems way too low! Well, that's the point and we will tell you why. You are not alone, around a thousand of these are sent out at the same time within the same area and it happens all the time. The goal of these is to get a bargain from someone willing to fire sell their property so they can flip them at a higher price. If you have received one, there is no reason to be alarmed or offended by these offers. Every property owners address is public record and the value at which they want to purchase your land doesn't reflect the value of your property. In this article we will look at the strategy, how they send them and how you should respond. Let's get into it!
Land Mailers - Someone Wants to Buy Your Land!
How do Land Mailers Work
Land mailers are sent by investors, land flippers and companies trying to capture deals and make a profit flipping your property. They research an area thick with vacant land all in one central location. Using software like Data Tree, they draw a circumference around a zone and pay for the list of all the tax mailing addresses of these property owners. As we said, this is public record, no one is spying on your personal life.
Using comparable sales, they calculate an offer they can send to all these property owners at one time. In short, the offer will often be around 10% to 30% of what they can sell them for. These mailers are sent by a mass mailing company and at this point the land investor waits for responses. Often times, the response rate is low, around 5% to 10% out a 1000 mailers respond. They also pay a good amount to send these out, but all it takes is a few deals to return a good profit. There are some perks they offer however, they will do all the research and pay all closing costs, avoiding the middle man such as a real estate agent. Using a real estate agent could take around $1500 or more out of your pocket as the seller.
How They Value Your Land
You may think the offer is offending and that they are trying to scam you out of full price. However, keep in mind they have a lot of costs doing this and very few people respond most of the time. Given the cost of the mass mailers, closing costs, title report and low response rate, it's about right they use this method. But yes, it's not the full value of your land and the deal isn't for everyone. But as you will see later in this article, these offers actually really help some people who need fast cash. They aren't trying to be crooks or scam people, a low valued parcel of land can be hard to sell sometimes. Especially if you don't know what you are doing.
The thing is, many land owners get extremely offended by this, it's not uncommon for investors to get angry phone calls from property owners. "How dare you send me this offer! My land is worth way more!". The truth is, there is no reason to get angry from these offers, it's good to know people want your land even if they plan on flipping it. In fact, they sent this offer because they see value in your property. You should be happy this happened, it doesn't always happen to everyone.
Another thing, if someone is willing to sell for 10% of their properties value, do you really want them lowering the value of your area on the open market? These land flippers will increase the value around the area by selling these for even more. Not to mention they know methods of selling land outside of Zillow and the that exposure is good for your property value.
How To Respond To The Offer
First things first, if you think you can spike the price on them and they will still buy it, you thought wrong. This is this their business model, they flip land. There is no sense in buying it if they can't return a profit, it's not like they really want your land so bad they must have it at any price. You may be able to talk the price up a small amount depending on the buyer, but don't count on it. The offer is for people wanting some quick cash for land they don't have plans for.
These land mailers will either be a flat basic offer, "we want to buy your land so call or email us". Others are actual purchase agreements you sign and send it back contingent on due diligence. This means they will check the title that you own the land and find any liens if any. They will not purchase property if it has tons of issues, even if you signed the purchase agreement. If your property does have issues they can sometimes rectify them if the cost is small.
Some investors focus on people with delinquent taxes too, these are people that can't afford the property taxes or simply don't want to pay them anymore. You may want to think about taking the offer if this is the case, the county will take your property anyways for delinquent taxes. If you're that strapped for cash where you can't pay property taxes, fast cash might sound attractive.
Should You Accept the Offer
Any home, land or any other type of real estate doesn't have any actual required set price. It's always an agreement between the seller and buyer. You can list any thing you own for a million dollars, even if it's worth $5k, you can even trade your land for a car, it's up to the two parties. It all depends on if there is a buyer willing to pay the price you set.
I once knew a lady in Mexico selling a piece of land way too high, it was at least 10x above true value in my opinion. I was thinking, there is no way someone will pay that. Her comment was, "There are 8 billion people in this world, I only need one". While I will remember this quote the rest of my life, my guess is no one bought it. You may want a lot of money for your property and can list it yourself, but you could end up never finding a buyer.
Land isn't always the easiest thing to sell and real estate agents will take a big chunk to help you sell it. Owning a high value property like a big million dollar farm won't get these mailers. These letters go out to properties that are often worth $30k or less, sometimes in a distressed area.
There is a reason people do accept these offers, after all they continue to mail them so it must be working. But why?
Reasons People Accept These Offers
Delinquent taxes - If you are behind in property taxes, eventually the government will take your land and you will get nothing. If you can't afford to pay your delinquent taxes and no one is buying your land, it may be smarter to avoid a foreclosure and get fast cash.
Undesirable Land - Maybe you purchased a property and it didn't go up in value like you thought. Some land gets really distressed, the HOA or town runs out money and disbands, the planned utilities never went in, no one is moving there. Things like that, these can sit on the market sometimes without buyers.
Real Estate Agent Costs - Say properties like yours are selling for $5k on Zillow, you can sell it by owner on Zillow but it's not always easy. The local real estate agent in your area can get more exposure, but it's at a big cost. No matter what the value of your land is, a real estate agent will want a basic minimum commission for their work. This can take 30% to 40% out of your $5k sale. Any land investor knows how to close deals themselves or has a title company on hand to do it. Just about 99% of the time, the land flipper will pay all closing costs. It's easy, painless and you get exactly what they offered in cash. Years ago I sold some land with a real estate agent, I had a buyer for $3,500 and was excited thinking I would get at least $3,000. No joke, I took home $250 after all was said and done. The agent and cost of the whole process took pretty much everything from me.
Plans Didn't Work Out - Some people back in the day had ideas of building their own home. They bought the land years ago and the plans changed. They might even be wealthy, they just don't plan on using the land and don't care anymore. It's not the money, they just don't want it anymore. To get some cash within days and have someone else do all the work is appealing. If you're in this category, these mailers make it super simple.
Some Reasons to Refuse The Offer
The Area Is Popular and Growing - Some land while it may not be worth much now can drastically change in value fast. We have seen land in Arizona that people would easily get rid of completely reverse and skyrocket in value. One of the reasons this happened is because the local town was having fast growth. Walmart decided to make a massive hub which brought in tons of jobs, people needed a place to live and building a home sounded great. The land was cheap and a buying frenzy started, thus skyrocketing sales and values. Believe me, land flippers keep an eye on this, they might know the news before you do. It's best to keep a close eye on the values of the properties and especially the local news.
Land is Cheap to Hold - If you don't need the money and your property taxes are low, it may be best to hold and wait for the value to increase. Land is assessed at a much lower tax rate than homes, if there are no improvements on the property the tax bracket and assessed value is lower. You can often hold land under $100 a year, eventually over time things might improve and the area grows.
Also there's no maintenance, you hold it and don't have to worry about anything. Cheap land overtime can go up a massive percent. Imagine people in the 1900's that bought property in San Diego CA for pennies on the dollar when nothing was there. In 100 years the area was built out till the point where it's almost impossible to find land. That property that was purchased super cheap because nothing was there is now worth at least a million. While not guaranteed your property will do anything like this, if it's cheap to hold and you can pass it down, why not. They aren't making anymore land, but we are definitely making more people.
You can Sell it For More - Land can be hard to sell by owner sometimes, flippers often times have access to land groups, land websites or bulk investors. However, if your area is popular and land is selling easily, there's no reason to sell it cheap. If it makes sense paying an agent or title company that will make it sell fast, you might as well skip the 30% offer and sell full value yourself.
Don't Be Offended!
You would be shocked to know how mad people get at these offers. It's not uncommon for people to call these land flippers and cus them out. Why would anyone do that, if someone wants to buy something of yours why would that make you angry. Remember, they are offering you 10% to 30% of your lands value for a reason, it's not like you have to accept it. At least it's nice to know someone wants it. It's their business model so don't hate them for trying. In fact, they are getting rid of everyone who would sell it for less. This is only a good thing for the property values near your land. The local assessors see higher sales and your properties assessed value will go up.
You Accepted The Offer, What Are The Next Steps
Say you decide to sell it to these land flippers, can you trust them that you'll get the money? What sort of process can you expect to take when doing this? It's fairly simple, some will close the deal themselves and some will use a title company. If they are buying your land for $10k or less, it often makes more sense for them to self close. They will research the land to make sure you're the owner, also that there are no outstanding liens. They will usually send you the deed for signature and a check, therefore trusting in you that you will finalize the deal. Unless you really trust them, you probably shouldn't sign a deed without the money in front of you in some way, at least a check ready to cash after signature. After all, deed fraud, while extremely illegal does happen. Once you sign the deed in front of a notary and mail it to them, it's gone. You can't exactly stop the recording nor do they have to recorded it right away.
Some will use a title company or mobile notary, a title company will often act as a middle man with the money till the deal is done. A mobile notary can bring the check along with the document, once you sign they give you the check. How easy is that, you sit at home, sign the deed and get a check. It's finished!
In respect to the people we know sending out these mailers, they are usually trust worthy. In fact, we have yet to see otherwise, most take the initiative to send you the check before even signing the deed. They depend on these deals and also don't want to be taken to court over cheating someone. The process works, it's easy and if both parties are happy, why not.
We hope this article helped clarify this crazy letter you just received in the mail. Be thankful and don't blame them for trying! After all, there is now an option for immediate cash at hand and you didn't even lift a finger.