Did you know the United States has 403,107 acres of vacant land? That number only reflects vacant land in the country’s top ten most vacant cities.
If you are anything like my students, you have already spotted an opportunity. You could become a licensed real estate agent specializing in selling off those parcels of land.
But before you invest any money into your licensing journey, let’s first answer: do you need a real estate agent to buy land? No, the law does not mandate clients to work with real estate agents to complete land transactions. However, due to its complex nature, both buyers and sellers are advised to partner with estate agents when purchasing vacant land.
In this article, we’ll explore the roles of real estate agents in land transactions. By reading on, you’ll gain the knowledge that could save your clients time, money, and potential headaches down the line.
Role of a Real Estate Agent in Land Transactions
The role of a real estate agent never changes, regardless of the type of transaction they are involved in. Whether they are working on rentals, selling commercial properties or homes, estate agents must uphold the duty to protect and serve their clients’s interests.
When they are exploring land transactions, that service is expressed in this form:
Decoding the Legal Landscape
Buying vacant land differs significantly from purchasing a home or office block. Once a client decides to become a “landlord,” they enter a new and complex territory that demands a set of real estate terms beyond the everyday language.
They must understand the perimeters of zoning, land boundaries, and easements, particularly egress and ingress. Depending on the land’s location, they may need to complete environmental tests.
These undertakings require a major time investment to understand and justly service. This is where a realtor slides in.
As a real estate agent, you have the knowledge and skill set to guide clients through this legal landscape, helping them avoid court squabbles. As part of your role, you may also help your client investigate the legal attachments to a plot of land.
Help Clients Secure Financing
The reality most buyers are not accustomed to is the fact that financing land is a complicated process. Banks and other financial institutions are often reluctant to put money on a vacant plot of land because its yield value is not guaranteed.
Think about it this way: if your client is buying a house, lenders already know the home’s value and can seize and resell it should they default. That avenue guarantees them their money back.
But with land, finding a buyer is harder if the borrower defaults. And even if they repossess the land, what would they do with it? That makes vacant land terrible collateral.
Now, a realtor with a network of lenders would be better positioned to help their client secure funding.
An agent may contact a local banker who has local market knowledge and familiarity with the land in question. This individual could easily buy into your client’s vision and could stand to benefit from the land development.
If the locals fail, agents could assist clients in knocking on other financing doors like the USDA or the United States Department of Agriculture loans and home equity loans.
Determine Cost of Development
When a client seeks a land realtor, they already have a vision. Their concern is to find someone to act as a bridge to that vision. Bring their vision to reality.
However, the problem with dreams is that they are sometimes unrealistic. That calls an agent to take on another role, a pragmatic role.
As a real estate agent in a land transaction, expect to play referee, helping an agent determine:
1. Accessibility: Is the land your client wants to build accessible? How far is it from the main road? Will they need to construct an access route, and what will it cost them?
These are all accessibility issues your client must figure out from the get-go.
2. Utilities: When agents sell a home, they sell the complete package. The pumpkin is now a carriage. But the land? It is the before. This means there is no plumbing, heating, or electricity connected already.
Your client will have to decide how much it will cost to build or connect that infrastructure.
Look around at the land and review its vicinity. If you are in an urban neighborhood, your client’s cost is related to connecting to already existing infrastructure. But if you are journeying off the beaten path, costs could go higher as this may involve building a new system.
3. Potential Return: The last development cost considers the yield. Will your client walk with a good return if they decide to sell? This will help them see if the project is worthwhile.
Are there signs of future development in the area? Do trends whisper consumers will soon favor that territory? These are tell-tales that could help your client make a strategic purchase.
Negotiate the Best Deal for Clients
Black, genuine leather shoes, slick silk ties, and expertly tailored suits, real estate agents are negotiation masters. “Talk the price down” is the unspoken rule of the industry.
Backed by market and land usability reports, an agent should help their clients walk away with the best deal on the table. This is an integral part of our fiduciary duty.
I dive more into this in the article: Do Real Estate Agents Negotiate Price?
Solidifying Your Position as a Land Expert
As a realtor, solidifying your position as a land expert is crucial. This involves staying up-to-date with land use regulations and zoning laws. These rules can change frequently, and being aware of the latest guidelines will ensure you provide accurate advice to your clients.
Cultivate relationships with landowners and developers. By doing so, you’ll gain firsthand knowledge about available lands on the market or upcoming projects.
Leveraging technology and data for comprehensive market analysis should also be part of your strategy. With advanced tools at our disposal today, we can analyze trends, predict future demands, and make informed decisions based on facts rather than assumptions.
Lastly, continuously enhancing your knowledge and skills is essential for success in this niche. Attend seminars or workshops, read books written by experts, and join online forums where discussions revolve around buying or selling vacant lands. All these efforts will help you stay ahead of the curve.
The Value of Expertise
While not legally required, it’s clear that the complexities of vacant land transactions make having an experienced real estate agent a must. Our role in this sector is not cosmetic but rather crucial to assisting agents make the best decisions.
Next Steps
Ready to dive into the world of land transactions? Here are some steps you can take:
1. Research: Start by understanding local zoning laws and regulations.
2. Network: Connect with local bankers, developers, and other industry professionals who might be able to assist in future transactions.
3. Learn: Attend workshops or seminars focused on land purchase and development.
4. Analyze: Leverage technology for comprehensive market analysis.
What has been your experience buying or selling vacant lands? Have any tips or stories about working on these types of transactions? We’d love to hear from you! Share them in the comments below.
