Explaining the buying process: Part 1
Purchasing land may at first seem like an unending process of getting your hopes up and filling out paperwork. In the blink of an eye the prized property you had in mind can be taken off the market or you may uncover there are outstanding debts associated with the land. These worries will certainly deter you as a prospective buyer, but you shouldn’t jump out of the market just yet. There are plenty of opportunities to find a piece of land that meets your needs, you just have to know where to start.
In a multipart series, certified land specialists from Mossy Oak Properties provide their insight on the types of things buyers need to know. By understanding the buying process, you can complete a land transaction more quickly and within a price range you deem acceptable.
The first few steps
The key to a promising land search is to start off on the right path. Perhaps the foremost concern when buying land is whether you will have enough money to do so in the first place. Of course there are funding options available, but if your financial position is not stable, then it may not be the best option to make a large purchase.
Robert Eason, co-owner and principal broker of MOP Delta Land Management in North Little Rock, Arkansas, explained buyers are better-served by already understanding their purchasing power.
“Some folks come to us with cash, then shy away from looking at a larger property that they could afford if they were to get a loan at today’s cheap interest rates,” said Eason.
While you may have your financial house in order, you’ll still need need assistance from a land broker, and likely a lender as well. As such, it may be unclear how much of the buying process these vendors should be dictating compared to how in control you should be.
Eason noted he prefers to work with someone who already knows what they are looking for and is conducting some of research on their own.
Jamie Spencer, owner and broker at MOP Tennessee Land and Farm in Nashville, Tennessee suggested the same thing, however, it’s still important to contact an agent before moving forward with process.
“There is absolutely nothing wrong with doing your own homework when searching for land,” said Spencer. “In fact, I recommend it. Any extra ‘bullets’ you can load into your real estate search ‘holster’ the better, however, always communicate with your broker any questions that may arise from your own research and don’t make any assumptions without consulting your broker.”
In the initial stages of your property search you can get a good idea of how certain tracts of land are priced and whether they are located in a region of your choice. Spencer recommended buyers should first look at the MOP website because it is a map-based network of properties and agents. Further, Eason stated that through MOP, you can refine your searches to categorize the listings by county, price, date, etc.
In essence, the more you know, the more you bring to the table, thus increasing the chances of closing a deal.
Entering the land market
Once the initial preparations have been made, it’s time to actually look for financing and narrow down purchase options.
“In most cases, folks don’t even realize the options they really have when looking to finance land, especially when it’s not their primary residence,” said Spencer. “There are several farm/land type lending institutions that have more favorable financing options than your typical large banks. Local Farm Credit Services locations are very customer-friendly and offer rates that sometimes surprise clients simply because people don’t know those options exist.”
Eason echoed this sentiment, saying Farm Credit Services have 20-30-year loans that are customized to rural property types.
“Farm Credit Services creates products that allow you to finance improvements you plan to make, such as irrigation on a row crop farm or ponds on a recreational property, along with the initial purchase price,” Eason stated.
You’ll need to tie your lending requirements to the specific type of property you intend to buy. While land prices may differ by region, other factors such as availability, interest rates and easements can also affect pricing.
“In the Southeast, an exceptional parcel of recreational land can really stretch your wallet, as it could contain features that are hard to find in most areas,” said Spencer. “Features that can drive up the price of recreational property are views, water, rivers, lakes, mature hardwood, wildlife availability and seclusion.”
Additionally, investors – those simply seeking a return, rather than to live on the land – can also affect prices of land. Eason noted that in the past six years, agricultural land has become more expensive as investors have looked to ag as a way to increase wealth. Further, flooded green timber tracts have also been selling at record levels.
Flooded green timber stands are very rare, making them prime real estate targets of high net worth individuals who are quick to purchase.
While prices can fluctuate depending on the state of the economy, understanding how the market can affect prices is crucial to getting a good deal on a land transaction. However, it’s important that you avoid trying to time the market, as it is much better strategy to purchase a tract of land as it appears on the market because you never know how quickly it can be bought before you get the chance to.
For more information on the buying process, stay tuned for Part 2!
Courtesy of Mossy Oak Properties