Pros and Cons of Selling to a Washington Land Company

Washington state's diverse landscape offers a variety of opportunities for landowners, with approximately 14.8 million acres of agricultural land as of 2017, according to the Washington State Department of Agriculture. This represents about 35% of the state's total land area. Interestingly, the average price of farmland in Washington has steadily increased over the past decade, rising from $1,960 per acre in 2010 to $2,900 per acre in 2020, as reported by the USDA National Agricultural Statistics Service. For landowners considering selling their property, Washington land companies present a unique set of advantages and drawbacks. Understanding these pros and cons is crucial for making an informed decision about whether to sell to such entities, especially given the state's diverse land use patterns and evolving market conditions.

How Land Sales Typically Work in Washington

First, it helps to understand the standard process for selling land in Washington. The traditional route is hiring a real estate agent to list your lot on the Multiple Listing Service (MLS). This exposes your property to the widest range of buyers - from individual home builders to developers.

The agent will market the lot, field buyer inquiries, and schedule property showings. When an acceptable offer comes in, they'll help you negotiate terms and navigate the closing process. This open listing strategy casts a broad net so you can potentially get top dollar. However, it also means tackling tasks like determining price, advertising, dealing with trespassers, and waiting through contingencies. Real estate commissions are typically 5-10%.

Alternatively, you could contact local land buying firms like Land Boss that purchase property wholesale. They will make a cash offer significantly below retail value - usually 40-60% less. But the transaction happens quickly, closing in as little as 7 days, and the company handles all closing costs.

Now let's go over the notable pros and cons of these two options if you were selling land in Washington.

Potential Advantages of Working With a Land Buyer

It's a fast and straightforward process

The headline benefit of selling to a land company is how quick and hassle-free the process is. You skip the work of pricing, prepping and showing the property. The buyer handles all closings costs and documentation. For those needing to unload a property urgently, Land Boss and similar firms are attractive because you can pocket the cash fast.

Avoid the headaches that come with listing privately

Listing land on the open market comes with many potential frustrations. Pricing land is notoriously difficult. Paying for marketing like signage and photography adds up. Unwanted visitors and vandals may find their way onto the vacant lot if it's in an isolated area.

And if an acceptable buyer emerges, there's the contingency dance of inspections, appraisals, securing financing, etc. Then the closing date could still be months away. Selling to an equity firm simplifies this tremendously.

No agent commissions to pay

Speaking of saving money, when you list land through an agent, their commission is typically 5-10% of the sale price. There are also ancillary costs for marketing materials and listings. By approaching buyers directly, the full proceeds end up in your pocket.

Receive a guaranteed cash offer

Unlike listing on the open market, dealing directly with a land buyer guarantees a sale. There's no risk of the property sitting for months without an acceptable bid. As long as you and the buyer settle on terms, they purchase your lot. For those facing financial difficulties or emergencies, this certainty is advantageous.

Flexible terms tailored to your needs

Land companies can structure deals to suit a seller's specific circumstances. For example, if the owner needs cash urgently, the firm may be able to close in a week. If the seller needs a few months before vacating, the company can agree to a later closing date. Their offers also avoid buyer contingencies that can delay or derail a traditional sale.

Drawbacks of Selling to an Investor

The offer price will be below market value

There's no avoiding the fact that land investors make wholesale offers significantly below what you may get on the open market. It could be 40% to 60% less than the hypothetical listing price. For landowners focused solely on maximizing profit, listing with an agent makes more sense. But for those who prioritize speed and convenience, the discount may be worth it.

You lose out on potential price appreciation

If you believe the lot still has significant room to gain value, selling now means you lose out when the buyer eventually resells it for a retail price. Holding out to list the property could mean ultimately making 50-100% more over time if the market keeps rising. Again, it requires weighing present needs vs. future gains.

Less exposure compared to the open market

Putting your land on the MLS exposes it to the broadest possible range of interested parties - developers, investors, individual buyers, etc. But dealing directly with a company means only one potential bidder. So you lose the chance of competitive offers and bidding driving up the price.

No personal connection with the buyer

Some sellers prefer knowing details about the buyer and their plans for the property. They like forming a relationship and knowing the land will remain in the community. When you transact with a faceless company, some personal satisfaction is lost. But for others just seeking a quick exit, this isn't really a con.

Lose out on tax reduction strategies

Those looking to sell land through tax-advantaged means like a 1031 exchange are better off listing. When you sell outright to an investor, you must claim all the taxable gains in the current year. If deferring capital gains taxes are part of your plans, think twice before going the wholesale route.

Key Tips for Selling Land in Washington

If you're exploring options for selling your Washington property, keep these suggestions in mind:

• Consult a real estate attorney or agent early on to understand the legalities.
• Thoroughly research recent land comps and values in the area. Online valuation tools can help.
• Know your priorities as a seller - are you flexible on timing or price? Open to creative terms?
• Interview multiple land buying companies and compare offers. Get quotes from 3-5.
• Inspect recent area sales to see the price difference between retail and wholesale deals.
• Drive by your property frequently if vacant. Secure access and consider no trespassing signs.
• If considering listing the lot, research and vet agents thoroughly. Seek referrals from neighbors.

The choice between selling land wholesale or retail isn't always black and white. With the right prep work and clear priorities, you can find the best fit. Firms like Land Boss aim to bring transparency, fairness and efficiency to the seller's journey.

Final Thoughts

Deciding how to sell your land in Washington requires carefully weighing several factors. The choice between accepting a wholesale cash offer from an investor or listing privately hinges on your personal finances, timing, and risk tolerance. While a land company provides speed and convenience, listing on the open market maximizes exposure and sale price. Much depends on current property values and whether you can afford to wait for the ideal buyer. Consult with professionals to understand your options fully. With reasonable expectations about the process, you can craft an exit strategy that makes sense for your circumstances. Washington is filled with natural beauty, and your piece of it represents a valuable asset. Find the buyer who will treat your land with the care and outlook you desire.

Frequently Asked Questions (FAQs)

How long does it take to sell land to a land company in Washington?

Selling directly to a land company is typically much faster than listing a property. Expect to receive an offer within days or weeks, and be able to close within 7-14 days in most cases. The speed and efficiency is a major benefit of going the land company route.

How much below market value will a land buying company offer for my property?

Most investors who buy land wholesale offer 40-60% less than retail market value. This allows them to earn a profit when reselling the property. The discount varies based on factors like location, terrain, zoning, etc.

Should I interview multiple land buying companies before selling?

Yes, it's wise to contact 3-5 potential buyers and compare offers. Even a 10% difference in price could add up to tens of thousands on a valuable lot. Weigh each company's reputation and close rates as well.

What costs will I pay when selling directly to an investor?

The advantage is there are zero commissions or marketing expenses. The buyer covers all closing costs like title fees and recording charges. You simply pay capital gains taxes on the sale.

Can I sell my land on an installment basis to defer taxes?

If tax deferral is important, listing with an agent is better because land companies focus on outright, cash purchases. But some may structure seller financing for an additional fee.

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