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As the property owner, you determine how you want the deal to be structured. Generally speaking, you can choose between price and terms--the two key components of the purchase contract. They tend to work in an inverse relationship meaning you usually sacrifice the one to get the other.
The price is obviously the amount of money you receive for your property. "Terms" are the conditions of the contract such as time until closing, Seller financing, and potentially a partnership relationship with the Buyer.
If you want to get the very top dollar for your land then you should plan on it being under contract for a long time (usually 6-18 months). If you want to get your money quick then you won't get nearly as much money for the property. It's a give and take relationship between Buyer and Seller.
Option 1 - Short Due Diligence with Quick Close
- In this option the Buyer usually has 30-45 days to conduct their "due diligence" - researching the property zoning, soil conditions, boundary survey, water rights, etc. After the Buyer has completed their research and determined the property is worth buying, they usually have another 30-45 days to finalize their financing and close the transaction.
- Time - This is the quickest option and you get your money the soonest. Usually 2-3 months from the time we sign a contract to the time you get your money.
- Money - You tend to get the least amount of money for your land in this option because the Buyer has to bear all the cost and risk of owning the land while trying to obtain approvals from the city/county.
Option 2 - Seller Note
- In this option the Seller finances a large portion of the Buyer's purchase loan. Seller receives a down payment of 10-25% at time of closing (usually 2-3 months) and then interest payments on the balance of the note.
- Time - Quick close but Seller doesn't get all their money until Buyer pays off the note which may be as long as 18 months.
- Money - In this option the Buyer is usually willing to pay a little more than in Option 1. The Seller also receives additional interest on the note.
Option 3 - Long Due Diligence while Developer Obtains City/County Approvals
- Buyer has sufficient time to obtain zoning changes and subdivision approvals. This lowers the Buyer's risk because they don't have to close on the purchase until they know exactly what kind of development will be allowed.
- Time - The Seller doesn't receive money until after all the approvals are in place--usually a 3-12 month process.
- Money - The Buyer will pay more for the land because their risk is lower.
Option 4 - Joint Venture Partnership Between Buyer and Seller
- This is a classic business partnership with the Buyer and Seller both contributing to the joint venture. The Seller contributes their land at a pre-determined price. The Buyer contributes their experience, expertise, and pays for the road and infrastructure improvements. As the developed land is sold, the Seller gets their money for the land, the Buyer gets their money for the improvements, and they split the remaining profit.
- Time - The Seller doesn't receive money until the developed lots are sold--usually 9-18 months.
- Money - The Seller receives a high price for the land and gets an equal split of the profits.
This can all be confusing and potentially overwhelming. Please contact us if you would like to talk through the different options with their pros and cons. Before entering into a contract with you, we will go to great lengths to make sure you understand your options and settle on one that you are most comfortable with.
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