Pros and Cons of Selling to a Hawaii Land Company
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By
Bart Waldon
Finding a buyer for raw land in Hawaii brings its share of challenges with various permitting, infrastructure and access requirements specific to the islands. Yet with over 1.3 million acres currently devoted to farming across Hawaii according to the USDA's latest Census data, there exists substantial demand for agricultural land ownership within the state. For landowners exploring liquidation options, one potential route involves selling directly to a pre-vetted Hawaii land company. These specialized real estate investment entities possess extensive resources to overcome barriers and optimize land tracts over the long-term. They also have capacity to buy properties directly for cash fast.
However, selling via private sale also means you must conduct ample due diligence upfront, get transparent on pricing, and decide if the certainty of closing quickly outweighs possibly leaving some sale proceeds on the table. Finding the right Hawaii land acquisition company aligning with your objectives takes priority. With so much natural beauty and endemic value across the islands requiring environmental stewardship, entrusting your Hawaii land to conservation-minded yet realist owners matters greatly.
Overview of the Hawaii Real Estate Market
The Hawaii real estate market is unique compared to other states due to its island geography. There is only so much land available, which tends to keep property values high, especially in desirable locations. However, the market is volatile and dependent on the economy and tourism. During recessions, land values can plummet in Hawaii just as they do elsewhere. There are also fewer buyers actively looking for land compared to populated areas on the mainland.
Outside of Honolulu on Oahu, Neighbor Island locations like the Big Island, Maui, Kauai, Molokai, and Lanai have even smaller buyer pools. This shortage of buyers makes marketing and selling land in Hawaii more difficult and time-consuming. Owners sometimes wait months or even years to find the right buyer willing to pay their asking price.
Pros of Selling to a Hawaii Land Company
Selling Hawaii land to a local land company has a few advantages compared to listing on the MLS or attempting to sell it yourself.
Cash Offers Make for Quick Sales
One of the top pros of going with a Hawaii land company is the ability to get an all-cash offer, which results in a much faster sale. Land companies have funds readily available to buy properties that fit their purchasing criteria. Once they make an offer, there is no need to deal with buyer financing. The sale can close within a few weeks instead of months. For sellers needing to liquidate land quickly due to urgent circumstances like job loss or medical bills, this fast sale timeline is ideal.
No Need to Offer Owner Financing
Banks typically don’t lend money for raw land purchases, so Hawaii land sellers often need to agree to owner financing deals to attract buyers. This involves collecting monthly payments over years until the buyer pays the full amount. If the buyer defaults, the seller could be stuck taking back the property through foreclosure. Land companies pay cash upfront, so there are no financing contingencies to work through.
As-Is Condition Accepted
Land companies also buy properties in as-is condition, eliminating the need for sellers to fix any issues with the land before listing. Making repairs and improvements to prepare a vacant parcel for sale takes time and money. The land already needs to clear title and pass due diligence for an offer, but cosmetic issues don’t matter. A land company will accept unimproved land in rough shape.
No Marketing or Negotiations Required
Attempting to sell land FSBO requires actively marketing and showing the parcel to prospective buyers. This involves tasks like staging, creating listings, arranging showings, negotiating offers, and coordinating closings. It can take months or even years to go through that whole process and finally close a sale. With a Hawaii land company, they handle everything on the buyer side. Simply reach out for a no-obligation offer and close once you accept it.
Pay No Commissions
Selling land on your own means avoiding real estate agent commissions, which are typically 5-6% of the sale price. Land company direct buys also let you skip paying these commission fees. There is no sales listing agreement involved. This saves you thousands of dollars, maximizing your profit.
Cons of Selling to a Hawaii Land Company
Of course, there are also a few downsides to divesting Hawaii real estate via a quick cash sale to an investment company.
Lower Sale Prices Than Full Market Value
The biggest drawback of going with a Hawaii land buying company is that you won’t get top dollar for your property. These companies need to purchase properties below market value so they can turn around and sell them later at a profit. Expect to receive about 70-80% of what your land would be worth on the open market. For some sellers, the speed and convenience outweigh the reduced profit. But if maximizing your return is the priority, listing it instead is the way to go.
Limited Negotiation Opportunities
When you receive an offer from a land buying company, there is not much opportunity for price negotiation. Typically take-it-or-leave-it style offers are extended. Some companies may be willing to slightly increase their offer if you have a recent appraisal or comparable sales supporting a higher value, but they have maximum price points they will pay. Significant back-and-forth negotiation is not expected.
Chance of Reseller Issues Down the Road
Once a land company buys your Hawaii property, they can turn around and sell it to any buyer they choose. Only do business with established companies with reputable business practices. You want to avoid your old property sitting vacant and deteriorating or being flipped repeatedly. Research company reviews to make sure they maintain and improve land parcels.
Loss of Potential Appreciation
Hawaii land values are projected to continue rising in most markets over the coming decades. However, once you sell your land, you lose out on any future price appreciation. A parcel you sell today for $150,000 could be worth well over $200,000 five years from now. Timing the market is difficult, so this is more of an unknown, but is still worth considering.
Tax Implications
As with any real estate sale, tax obligations come into play when selling land to an investment company. Consult your CPA or tax attorney beforehand to understand capital gains taxes and other impacts. Some sellers can utilize tax-deferral strategies to reduce their tax burden when working with an investor buyer.
Typical Process of Selling to a Hawaii Land Company
If you decide moving forward with a Hawaii land company is the right choice, here is a rundown of what to expect during a typical transaction:
- Reach out to the company - Contact them via phone, online, or by visiting their office. Provide details about your land. Get pre-qualified for an offer.
- Property assessment - The company will research your land records, comparable sale prices, and other info to assess your parcel.
- Offer presentation - Within a few days or weeks, you will receive a cash offer from the company.
- Offer evaluation - Look over the offer and purchase agreement. Consult your real estate attorney if desired.
- Negotiation - Respond to the company with any questions or counters. Some back-and-forth is possible.
- Accept offer - Once terms are agreed upon, sign the purchase contract. The land will go under contract.
- Earnest money deposit - The buyer will deliver earnest money, typically around 1% of the sale price.
- Due diligence period - The company will research title history, encumbrances, and permits (30-90 days).
- Closing - Finalize the sale, transfer deed, and exchange funds. Recording fees apply.
- Vacate property - Ensure any personal property is removed from the land before closing.
Working with a reputable Hawaii land buying company can allow you to sell your vacant land quickly and hassle-free. But make sure to weigh the pros and cons, especially the below-market offer prices, before moving forward to maximize your time and investment return. Thoroughly vet any company before doing business. And consult real estate and tax professionals for guidance. With the right approach, selling your Hawaii land to an investment company can be a smooth process.
Frequently Asked Questions (FAQs)
What types of land will a Hawaii land company be interested in purchasing?
Hawaii land companies typically purchase vacant residential lots, agricultural land, undeveloped commercial property, and remote non-zoned acreage in any condition across all islands. They focus on undervalued or distressed properties.
How long does the sale process take with a Hawaii land company?
Reputable Hawaii land companies can make an initial cash offer within days to weeks of an initial property assessment. Once an agreed on price is set, they can close within approximately 30-60 days as they handle all legal and documentation internally resolving any title issues.
How much can I expect to receive selling my land to a Hawaii company versus listing it myself?
Selling to a professional Hawaii land company will typically net 10-30% below top market appraisals. However, land companies offset this pricing difference by handling all closing costs/fees, providing payments upfront, and navigating all sale complexities that commonly derail private land deals.
Does a land company take care of rezoning my property if needed?
Yes, reputable Hawaii land companies have extensive experience navigating the zoning and permitting processes with county officials to rezone property to boost its development potential and value over time after initial purchase. However, proper due diligence should be conducted to verify a company's rezoning capabilities and project history success rate.
Will a land company try to lowball me on price for an unfair deal?
Land companies need to generate profit post-purchase to sustain their business models. However, established companies build pricing models based on current market data of previous sales. Their initial offers consider reasonable appreciation potential balancing win-wins. Still, due diligence assessing fair value is key before signing any binding agreements.
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