Pros and Cons of Selling to a Ohio Land Company

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Pros and Cons of Selling to a Ohio Land Company
By

Bart Waldon

Ohio's land market is buzzing with activity, and landowners are taking notice. Recent figures from the Ohio Association of Realtors show raw land prices climbed 12% last year, averaging $5,800 per acre. The USDA backs this trend, reporting an 8.3% uptick in Ohio farmland values for 2022. But here's the kicker: Ohio State University researchers predict nearly a third of the state's farmland could switch hands in the coming decade. That's a lot of land changing owners.

With this flurry of activity, land companies have been making their presence felt. For landowners, this raises a crucial question: Is selling to one of these outfits a smart move? It's not a simple yes or no answer – there are real upsides and downsides to consider.

The Benefits of Selling to a Land Company

Selling land to a company that specializes in land transactions has some potential upsides:

1. Speed and Convenience

The top advantage of selling land to a company is that it can be much faster and more convenient than trying to sell the land yourself. Land companies have cash on hand that they are looking to deploy to acquire new properties quickly. This means you can sell your land in a matter of weeks rather than waiting months or years to find a qualified buyer. Land companies take care of all the due diligence and paperwork, so you avoid the hassles involved when selling land traditionally. If you need to liquidate a land asset quickly for whatever reason, a land buying company makes the process simple and painless.

2. Avoid Hassles of Showing and Marketing Property

Selling land on your own typically requires significant effort to market and show your property to prospective buyers. You may need to list with an agent, post online ads, or network with local real estate investors to generate interest. Even when you find a buyer, closing the deal can take substantial back-and-forth negotiating a fair price. However, selling to a land buying company means you skip all those headaches. The land company already has the capital ready to buy, so you don’t have to convince them of the value or “sell” them on the parcel.

3. Pay No Commissions or Closing Costs

Going the traditional sales route often means paying commissions to real estate brokers, as well as closing costs and legal fees. Land companies like Land Boss typically cover all these costs so the net proceeds you get at closing are maximized. Even if their offer is slightly below another bid, the added costs of a traditional sale can eat significantly into your profits. Selling to a company lets you avoid extra expenses and walk away with the most money in your pocket.

4. Sell “As-Is” With No Repairs

Selling on the open market frequently requires making repairs or improvements to get top dollar. Land buyers may request you put in roads, clear trees, or make other costly modifications before they will close at your asking price. Land buying companies purchase properties in their existing condition, no upgrades required. They take on the cost and work of any improvements needed, so you can sell your land hassle-free.

Potential Downsides of Selling to a Company

Despite the advantages, selling to a land buying outfit also comes with some drawbacks:

1. May Receive Below Market Value

The main risk when selling to a land company is that their offer may come in significantly below true market value. Most land buying companies aim to purchase properties at a discount they can later sell at a profit. An investor who plans to build or develop on your land may be willing to pay more than a company just looking to resell it down the line. While land companies will pay fairly based on their business model, you likely won’t receive top-dollar pricing.

2. Lose Appreciation If Market Rises

Similar to the point above, selling to a company means missing out if the land rapidly appreciates before they can re-sell it. For example, if new infrastructure like a highway gets announced near your parcel after you sell, the land will likely shoot up in value. However, you already cashed out at the lower price offered by the land buyer. Savvy sellers may want to wait out market fluctuations, but selling to a company locks in a fixed return.

3. Risk of Rezoning or Development Changes

Entering a quick sale to a land company also forfeits your involvement in the property’s future. After purchasing your lot, the company may successfully lobby to rezone the land for more profitable uses. While rezoning could increase the property value, you already sold at the lower pre-rezoning price. Alternatively, zoning changes could also decrease land values if new restrictions get enacted before re-sale. Selling your own parcel lets you take an active role in the process.

4. Unknown End Use of Property

Lastly, opting for a fast sale means you relinquish control over how your land gets utilized going forward. A land company may choose to break up and develop the parcel or simply hold it for speculative investment reasons. If you hoped to have input on the property’s future based on a personal attachment or vision, selling to an unknown third party eliminates that ability. The land will transfer hands to a new owner and use that may not align with your wishes had you sold it traditionally.

Key Tips for Selling Land to a Company

If you decide selling your land to a buying company makes sense, here are some tips to maximize your returns:

  • Shop around - Get quotes from several land buying firms to compare offers. While one company may propose $X, another may bid $X + 10% or more. The more quotes you get, the better chance of receiving top dollar.
  • Offer incentives - Offering to finance the sale yourself or including mineral rights may sweeten a deal if a company is on the fence about your asking price. Incentives give you extra bargaining chips during negotiations.
  • Time it right - If possible, selling when the market is down can help secure a better price. Companies have more buying power when land prices soften, allowing them to pay top rates. Optimal timing can boost the amount a buyer is willing to offer.
  • Weigh tax implications - There may be capital gains or other tax consequences based on your particular situation. Consult a tax professional to minimize your liability when finalizing a sale.

Final Words

Deciding whether to sell your land to a buying company or on the open market involves weighing convenience and expediency against maximizing profit potential. For many landowners needing to liquidate property quickly, the speed and ease of selling to an established land company like Land Boss outweighs potential risks of leaving money on the table. However, for sellers with more flexibility, taking the time to find the right traditional buyer often results in greater overall returns. Carefully examining the pros and cons based on your specific priorities and timeline is key to pursuing the best path forward when selling land in Ohio.

Frequently Asked Questions (FAQs)

What documents do I need to provide when selling my land?

When selling land to a company, they will typically request a copy of the property deed showing you own the parcel, a recent survey of the property boundaries, and any title insurance documentation. They may also ask for tax documents, disclosure of any liens or encumbrances, and information on current zoning and land use. Having all these materials ready will help facilitate a smooth sale process.

How quickly can I expect to receive payment after closing?

For a basic land sale, you can typically expect payment from the buyer within 5-10 business days after closing, assuming there are no complications with the title transfer or recording of the deed. Reputable land buying companies will process the purchase funds promptly to complete the transaction. Make sure payment details are agreed upon in writing within the purchase contract.

What taxes will I owe on the sale of my land?

You may owe capital gains tax on the profit earned by selling your land. The exact amount will depend on your tax basis, how long you owned the property, your income level, and whether the parcel qualifies for any exemptions. Consult a tax professional to understand your obligation. Some costs like surveys and legal fees may be deductible.

Should I require a land use restriction as part of the sale?

You can try negotiating a restriction requiring the buyer to only use the land in certain ways, such as prohibiting industrial activity. However, the buyer may resist as this reduces their options and profit potential. Unless you're willing to significantly reduce your asking price, most companies will not agree to land use limitations.

How can I ensure I receive a fair offer for my property?

Do your research to estimate the market value based on recent comparable land sales and area trends. Get quotes from multiple land buying companies to compare offers. Negotiate for a higher price if you have flexibility on closing timelines or can offer incentives like owner financing. Seeking multiple buyers is key to maximizing your payout.

About The Author

Bart Waldon

Bart, co-founder of Land Boss with wife Dallas Waldon, boasts over half a decade in real estate. With 100+ successful land transactions nationwide, his expertise and hands-on approach solidify Land Boss as a leading player in land investment.

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