The Hidden Value of Raw Land vs. Developed Lots

The Hidden Value: Raw Land vs. Developed Lots

When you hear about real estate, you might think of finished homes or bustling city apartments. But before any of that, there's the land itself. That raw, untouched piece of earth is the foundation of every development. And while it may seem like a simple swap, there's a world of difference between raw land and developed lots.

The Raw Deal

Raw land, as the name suggests, is land in its natural state. It's untouched by human development, lacking roads, utilities, and any of the amenities we're used to. Think of it as a blank canvas, full of potential but requiring a lot of work to bring it to life.

The Developer's Magic

This is where developers come in. They see that potential, and through a process of careful planning and investment, they transform raw land into desirable living spaces. This process involves several key steps:

1. Site Preparation: Clearing the land of trees, brush, and debris is the first step. This involves heavy machinery and can be a time-consuming and costly endeavor.

2. Infrastructure Improvements: Installing roads, utilities (like water, sewer, and electricity), and other essential infrastructure is a massive undertaking. This requires permits, coordination with local authorities, and significant financial resources.

3. Creating Homesites: Dividing the land into individual lots, often with specific zoning regulations, is another important step. This involves surveying the land, designing lot layouts, and ensuring compliance with local codes.

The Value Add

All of these steps add substantial value to the land. A raw, undeveloped property might be worth a certain amount, but once it's been transformed into a developed lot, its value can increase significantly. This is because buyers are willing to pay more for a lot that's ready to build on, with all the necessary infrastructure in place.

Why We Offer Less

First off, less is a relative term. It does not necessarily mean an offer below the true market value of the property, it just means less than you could potentially see another property listed for on the MLS. It is important to keep in mind that an offer from us does not have a 6-10% commission that gets paid to a real estate agent. MLS listed properties and properties sold off market do not net the same amount to the seller if the purchase prices were the same. Also, many times there is a difference in characteristics or restrictions between the 2 properties that are not evident until you start researching the development possibility. A third thing to keep in mind is that when you see a property listed on the MLS for sale there is no requirement for it to be listed at its fair market value. Often real estate agents will inflate a listing price out of ignorance, or in some cases misleading the land seller into thinking it will sell for a higher price just so they can win the listing. These 2 scenarios account for the vast majority of properties that sit on the market for long periods of time and inevitably suffer price drop after price drop all while gaining stigma in peoples minds that something must be wrong with it otherwise it would have sold already. This strategy sometimes works in favor of the land seller by capturing the eye, an more importantly pocket book, of a buyer who does not understand what properties in the area are selling for but more often than not, it results in a lower overall sale price than if the property were listed at the appropriate value from the onset.

As a developer, we understand the investment required for the development process and our offer is based on the costs and risk involved in developing land. When we approach you with an offer for your property, our goal is to offer you a fair price based on the land's current value, which takes into account the significant costs and efforts involved in developing the land.

If you feel our offer is too low, there are many ways we can structure a deal that provides a higher net amount to you as the seller. One way that we can offer a higher net price to you as the seller is if you are willing partnering with us by offering limited term seller financing. Because we do not then need to invest as much capital into the project, our risks are greatly reduced and we can offer you a higher purchase price. Please don't hesitate to reach out to us and have a conversation, you never know where it might end up!