Land Prices… The New “Normal”

Remember several years ago when gasoline skyrocketed to $4.00 per gallon? Of course you do, but did you quit driving, or even change your driving habits much? Probably not.

Now, what if the price had gone to $41.60 per gallon? Think you might have changed your driving, or even stopped driving at all.

In the North Carolina mountains, that’s exactly what happened in April of 2009 when asking prices for 100 acres or more of mountain land for sale shot up to $42,211 per acre. At that same time, the average selling price was a mere $4,017 per acre.

Can you guess what happened next? Yes – that’s correct – land buyers simply said “I don’t think so!” – and promptly disappeared from the land market. That unbelievable level of asking prices was the single most destructive move to hit to North Carolina land for sale market.

So… How did asking prices manage to climb to such oxygen-deprived levels back in 2009? Better yet, was there already in place something that might have prevented the destructive rise in asking prices?

Most land brokers, also being REALTORS®, subscribe to the REALTOR® Code of Ethics – right?  Take a look at the very first Article in that Code:

Article 1

When representing a buyer, seller, landlord, tenant, or other client as an agent, REALTORS® pledge themselves to protect and promote the interests of their client.

Better yet, look at how the following clarifies that first Article:

Standard of Practice 1-3

REALTORS®, in attempting to secure a listing, shall not deliberately mislead the owner as to market value.  

Nevertheless, in a market where actual selling prices averaged $4,107 per acre for 100+ acre parcels, brokers were taking listings with asking prices that AVERAGED $42,211 per acre. Is that what is called “protecting and promoting the interests of their client”?

In defense of those brokers, property owners wishing to sell were, at the same time, succumbing to plain old human greed. Reacting to false, unfounded rumors of huge sale prices, they were making unreasonable demands on their brokers to list at ever-higher prices. Brokers, under the onslaught of demands from sellers, capitulated and took the listings at unwinnable prices – and the land market collapsed under the weight.

Now – we all know we are not in control of mankind’s greed for affluence. Brokers do have one powerful tool at their disposal however. On the grounds of the U.S. Air Force Academy in Colorado Springs sits the ‘‘Eagle and Fledglings Statue’‘ – given as a gift to the Academy in 1958 by the personnel of Air Training Command. This statue contains the following inscription by Austin Dusty Miller:

“Man’s flight through life is sustained by the power of his knowledge.”

Very simply, there’s power in knowledge! Therein lies the broker’s solution to accepting grossly overpriced listings – KNOWLEDGE.

If a broker specializes in land (another powerful concept), he or she can list only properties priced to sell instead of wallowing through months and years without showings and buyers. This is accomplished by acquiring a complete knowledge set of actual sale prices over a period of years for land – and only land.

The first step is to acquire from the county tax office a database of all property owners owning over 100 acres. These records can often be acquired over the Internet (Google the “GIS” for your county), or by requesting a CD with the information from the tax office. These records general include the last sale date, and some reference as to the last sale price.

With that information, a fruitful database of actual sales can be compiled showing acreage, last sale price, sale price per acre, Parcel ID #, and name and address of the owner. Once you have 5 or 10 years of actual sales, and can present that data in a friendly, readable form to sellers, you will have ½ of the necessary knowledge needed to list property at fair market value. Notice that I said only ½ of the knowledge.

“What’s the other ½” – you ask? Property for sale now by all other brokers in the area will complete your knowledge base.

If a broker belongs to MLS, listing information can be researched through the MLS land listings. The database of property for sale now should include a Parcel ID number, the asking price, the acreage, and the asking price per acre. Convert that data into a table that is easy for property owners to view and decipher. Be sure to use some identifying information such as owners name, Deed Book and Page, or Parcel ID number. This gives your table added credibility to the person reviewing it.

When reviewing your tables with potential listing property owners, begin with past sales first. Explain that all information was taken directly from the local tax office – not your personal files. By presenting past sales in an objective manner, you reduce the raw emotion likely when they find prices  not as high as they thought.

Next, move on to properties currently listed for sale. These properties will be the competition faced by the property owner once they list. They are normally higher – being asking prices – and are likely to be more pleasing to the prospective listing individuals.

Be wary of listing property at the same level as others for sale now. Being higher than what past buyers have been willing to pay, these asking prices are the “wished for” prices of present owners – and not necessarily indicative of present value.

In summary, many properties in today’s land market are flat out overpriced – well above what any respectable buyer will pay. The broker who educates prospective sellers about the realities of today’s land for sale marketplace will come away with attractive properties – at fair prices. What’s more – buyers are always waiting!