How We Price Land – Blue Light Land

Understanding Vacant Land Pricing

We are often asked about the prices we offer for land or expressing concerns about those prices.

Sometimes land owners wonder if we are buying land in an area because something special is happening there. Their thought is that perhaps there’s some secret – or not-so-secret – plan or development driving our interest that also drives, or should drive, our price.

Other times people think land investment itself is some kind of secret game or scam to take advantage of the unaware.

And occasionally people even think land pricing implies something about their personal esteem and a too-low price is some kind of social insult.

The reality is much simpler, routine business practice and doesn’t involve any secrets or insults:

We buy land in areas and at prices where we think there’s a good chance we can later sell that land at a profit. If we fail to do that, we’re out of business!
We select areas to buy because of established patterns of properties available for sale and properties sold. These patterns are available to anyone on public web sites like Zillow. We aren’t privvy to insider information.
We buy and sell at different prices by providing additional services that create value for both our sellers and our buyers. We couldn’t possibly buy at the same price we sell at and expect to stay in business.

We created this web page to provide interested land sellers with the details behind our offer pricing so they can judge for themselves whether the value we offer them is something they actually want. You might decide to sell your land to us or you might not. Either way, we hope you come away with a much better understanding of land pricing in general and what we are offering to do for you. If you decide to try selling your property another way, you may want to review our page, How to Sell Your Land for More Cash.

Another perspective on the ethics of land investors in audio/video format: https://turningprofit.com/episodes/is-land-flipping-ethical/

The Wholesale / Retail Land Business Model

The land investment business is similar in some ways to other wholesale/retail type businesses you may be familiar with. As a business, we buy at one price and hope to sell at a higher price by offering additional services to all parties in the transaction.

Like similar services-added businesses, there isn’t just one fair price for the product – in this case a given parcel of land. There are different prices for the same land, based on who is doing what in the transaction.

It’s kind of like what we see with used cars, where there’s one price you get for a car as a trade-in to a dealer, a different price if you sell the car yourself to another individual using an ad service like Craigslist, and a still different price if you’re a car dealer who cleans the car up and sells it with financing on a car lot.

Different prices for the same land are based on how much work and overhead the buyer and seller each take on and how much non-priced service they are providing to the other party. Because these different prices may occur over a range, we call them Price Brackets.

Here are some examples that illustrate how the price brackets may vary depending on the retail price of a land parcel:

Full Retail Price	Discount Retail Price Bracket	Private Party Price Bracket	Wholesale Investor Price Bracket
$1,500	$800-$1,400	$400-$800	$50-$400
$10,000	$6,000-$9,000	$3,000-$6,000	$1,000-$3,000
$50,000	$40,000-$45,000	$20,000-$40,000	$10,000-$20,000
$200,000	$160,000-$180,000	$120,000-$160,000	$50,000-$120,000

These are only examples – actual properties may sell for higher or lower than these amounts.

The details behind the price brackets in land are:

Full Retail Price

This is what people usually think of as a land parcel’s “value”. The Full Retail Price takes into account the specific features of the property, its location, infrastructure, rules and regulations, comparable sales, local demand, etc. It’s also the first place we start our pricing process, by looking at what other properties in the area have recently sold for on the retail market.

However, full retail price is usually paid for land only when the land owner or their agent provides significant additional services to the buyer:

The seller is a professional in business or hires an agent who is in business and then the seller pays for the service (like a commission to a Real Estate Agent).
The seller or seller’s agent finds a retail buyer.
- They spend effort and money to effectively market and advertise the property to prospective retail buyers.
- They take calls from prospective buyers, answer their questions, address their concerns.
- They may meet with buyers in person / show the property or at least guide potential buyers to the property.
The seller waits and holds the property on the market for just the right buyer to become ready and able to buy.
- This may take months or years.
The seller or seller’s agent provides documents for the transaction such as the sales contract and any required disclosures.
The seller may offer concessions to the buyer – closing costs, paying for some or all expenses of testing or zoning variance, etc.
- A common concession is seller financing, which on lower price properties may even include rent to own plans with minimal down payment.
The seller or seller’s agent guides the buyer through the purchase process, sets up title and escrow services, knows and refers to other professionals as needed.

Also note, retail price can be more difficult for individual land owners to achieve on lots with a retail price of less than $100,000. This is because it is difficult to hire effective Real Estate Agents for lots in the lower price ranges. We discuss more about this problem in our Other Options section below, and at our companion article How to Sell Your Land for More Cash .

Discount Retail Price

This is like full retail, but with a discounted price, typically for a faster sale or reduced need for marketing.
- The seller does almost everything for a full retail sale, but takes a price cut of 10% – 40% or more in order to not have to wait as long for the right buyer to come along or not spend as much time and effort on marketing.

Private Party / For Sale By Owner (FSBO) Price

This can occur between two regular people or two professional land investors.
In either case, the price typically falls somewhere in the middle between retail and wholesale.
In either case, both the buyer and the seller are approximately equally involved in finding each other and in doing the work to get the sale to completion.
The problem for regular people with private party land sales is they often don’t know:
- How to find each other safely and effectively.
- How to find and engage the right third parties to help with the transaction (like title companies).
- Which documents to use to insure a legal and trouble-free transaction.
- How to get and set up financing if the buyer doesn’t have cash (banks almost never lend on vacant land).
That’s why such sales, while they can and do happen, are fairly rare.

Wholesale / Sale to Investor Price

The buyer is in business, or at least acts as if they are a business.
The buyer is typically easy to find via a web site or other advertisement, or even finds & contacts the seller by means of direct mail or other forms of marketing.
The buyer typically pays cash.
The buyer typically offers concessions to the seller, such as paying closing costs & tax pro-rations or delinquencies.
The buyer guides the seller through the process, provides documents, sets up title and escrow, refers to other professionals as needed.

In addition to added services provided by the seller or buyer, the difference between these price brackets depends some on what the full retail price of the land would be. Land parcels with high full retail prices tend to have discount, private party, and wholesale prices closer to full retail price than parcels with low full retail prices. This is because there are some relatively fixed expenses for overhead and transaction costs. It costs about $1000 to engage the services of a title company even on a very low value lot, but not much more than that for a lot that costs 10 or 100 times as much. An ad for a low priced lot takes almost the same amount of time and effort as an ad for a high priced lot, etc.

Blue Light Land’s Offers

As land investors, the offers we make are most often in the wholesale investor price bracket. To some, wholesale investor prices may seem unreasonably low. But remember that in return for the discount, we work to make it as easy as possible for land sellers:

We run web sites that make it easy for sellers to find us, pay for internet ads, and reach out to sellers with letters and make it easy to respond.
We buy when sellers are ready to sell. Sometimes this is months or years after our initial contact.
We answer questions and address concerns sellers may have about the sale.
We work to resolve ownership, zoning, access, topography, and tax issues.
We commonly buy land sight unseen, without performing percolation tests or environmental studies.
We engage all the needed third parties to complete the transaction and manage them as necessary to get the sale done.
We pay cash.
We pay all closing costs and fees, all pro-rated taxes and assessments, and back taxes if there are any. For many sellers, the alternative is losing the property to a property tax lien or sale.
We relieve sellers of the need to pay Real Estate Agent commissions or advertising fees, take calls from buyers, travel to where the property is located to show it or close the transaction, etc.

Additional Common Pricing Issues / Questions

County Tax Valuations and Appraisals

Counties (or in a few places, cities) regularly determine a value of all real estate within their jurisdiction for property tax purposes. These values are usually available to the public free of charge at the county’s web site. Sometimes these values are close to the full retail price or the discount retail price. Sometimes these values bear almost no resemblance to any real price. It depends a lot on both the area and the specific property involved.

We do consider county tax valuations in determining our offer prices, particularly when our experience in a particular area indicates they are a reliable guide to market value.

Sometimes land owners got an appraisal when they purchased the property, or at some other time many years ago. We don’t know the background on such appraisals so we almost never can consider them in our pricing. Also, appraisals were often associated with land scams (more on that below). It’s possible the appraisal was done by someone in on the scam. It’s possible it was an honest appraiser who, like others, was fooled by the scam and assumed infrastructure was in fact coming to an area that it wasn’t. Or it’s possible it was a completely honest and knowledgeable appraisal but the land was just valued differently then. We never know.

As a land owner you could hire an appraiser to get an up to date valuation if you think ours is way off. If you want to go this route you could search on “Appraisers” in the area your property is in. This is typically only worth doing for very high value properties, and you should contact us first if you’re hoping we might use the appraisal to make a higher offer.

Back Taxes

When we buy a property we pay all back taxes due as part of the additional services we provide, so sellers don’t end up with a nasty surprise and get less than expected at closing. However, like the tax valuations, tax payment data is usually available at the county web site so we know what it is when we make the offers. If there are back taxes owed we typically subtract them from our offer and round down to an even dollar amount. If there are more back taxes owed than we can pay for the property, we inform the owner that we’re not able to make an offer at this time due to the back taxes.

Prorated taxes almost always apply unless a purchase is closing on the first day of the year’s tax assessment, typically January 1st. We pay these prorated taxes, and consider that in determining our offer price.

Original Purchase Price

We never consider the owner’s original purchase price of the property when determing our offer amount.

That may seem strange, since many people consider their original purchase price to be a significant factor in determining the price they think the property should sell for. However, the original purchase price simply isn’t the price any more. What is relevant is what people today will pay, which may be higher, the same, or less than was paid for the same property many years ago.

This problem of original purchase price is compounded by the fact that many lower priced properties in some areas of the US were originally purchased at inflated prices in land scams. We are most famailiar with these in Arizona, but they may have occurred in other states as well.

Abandoned subdivisions – for example, Arizona Land Scams in the latter half of the 20th century

This is alleged to have occurred before we got into the land business, so it is just what we have heard from others. But our understanding is the scams went something like this:

A scammer would buy a large parcel of land – hundreds of acres – in the middle of nowhere but that had decent access from an interstate highway. They’d legally subdivide the land into smaller parcels, set aside space for roads etc. just like a real subdivision. They’d run a grader over the new “roads” so it was clear where to drive. Then they’d stick props in the ground: street signs, fire hydrants, that sort of thing. All designed to create the impression that there was significant infrastructure going in. They’d create a nice looking map or model of the subdivision and put that in a construction trailer on the property. They’d stick a big sign on the interstate advertising the new subdivision and wait for people driving by on their way to…wherever they were actually going…to pop in for a look.

The scammers would sell the lots at hugely inflated prices using high pressure sales tactics to people who assumed, or were perhaps outright lied to, that soon there would be water, power, and sewer services available to the lots as well as local stores and other services. Get in on the ground floor before prices go even higher – that sort of thing. Once all the lots had been sold, they’d pack up all the props and use them to repeat the scam elsewhere. The infrastructure, stores and services never materialized. There was never a real plan to put it in because there are no jobs or economic base nearby that would support lots of people living there. These subdivisions remain mostly empty and without infrastructure to this day. And even full retail price today is a small fraction of what these properties sold for many years ago.

While we greatly sympathize with anyone who purchased land thinking there would soon be infrastructure available that never materialized, we are only able to make offers based on whatever is actually present today.

Closing Costs

We can offer more than normal on some lower end properties depending on some additional factors related to our closing expenses:

– We can and almost always do offer more to owners of multiple lots in the same area that can be combined into a single transaction, because this reduces our closing cost expense per property.

– We might be able to offer more to owners of higher value property elsewhere they’re also willing to sell us as a package deal, since we can consider the profitability of the transactions taken together rather than each transaction separately.

– We might be able to offer more when we don’t need to use a title company to close a low value transaction.

The last situation – no title company – is a little more complex to explain than the first two. We refer to it as “self-closing” and we can self-close when the purchase price is very low and we’re confident in taking uninsured title risk. Typically we do this only when ownership has been held for 10 years or more and all owners of record are able to personally sign both a new deed and a disclosure attesting (among other things) that there have been no liens or title claims filed against the property that they are aware of. However, there is still a fair amount of risk to us in doing this. An example would be where a government agency had filed a lien several years prior for way more than the property’s value to recoup the cost of indigent health care services provided to the owner. The owner could be completely unaware of the lien. If the lien happened while they were gravely ill or drugged I wouldn’t fault them one bit for not paying attention to / remembering all the paperwork they had to sign to get care at the time. Or perhaps the current owner inherited the property from the one who incurred the lien. In such cases if we didn’t go through a title company we’d (eventually) just lose whatever we paid for the property, and also have to reimburse a bunch of our own buyer’s expenses. The more we pay for a property, the more is at risk to that sort of thing. So we can’t just give the owner what we would have paid the title company. We have to balance what we offer in a self-close with the amount of risk it involves.

When all the owners of record aren’t able to sign documents due to death, disability/guardianship, or other such situations then the risk of self-closing goes up even further. A big pitfall we are aware of is when a deceased person’s rights in a property must be probated before that property can be legally sold. There are undoubtedly other pitfalls – which is why we, and people in general, usually use title companies for real estate transactions even when the cost of title is most of the purchase expense.

Other Options You Have as a Land Owner

While we are very interested in buying your land, we know we aren’t able to offer prices that fit all people in all situations at all times. We encourage you to consider all of your options as a land owner and make the best choice for you. Some other options to consider are:

Private Party Sale

If you’d like to try for a private party / FSBO sale of your land and are willing to work at it, there are some tips we can offer about how to effectively market the property to buyers. See our companion document, How to Sell Your Land for More Cash, for help.

Hire a Real Estate Agent

We are not Real Estate Agents, but we respect what they do and in the right circumstances, they can be very helpful. However, there are also some problems to be aware of when considering hiring a Real Estate Agent to sell vacant land, particularly with low and mid value properties. The biggest problem is that Real Estate Agents work on commission, which is typically a percentage of the property’s sale price. Vacant land parcels in an area typically sell for 5% to 25% of what a house in the area sells for. That means a Real Estate Agent typically has to sell at least 4, and maybe up to 20 vacant land parcels to make the same amount of money they’d make by selling just one house! So Real Estate Agents may devote much less time and attention to their vacant land listings as compared to their house listings. Also, the training and experience of most Real Estate Agents is focused on selling houses rather than vacant land. As a result, they commonly lack the skills to effectively market vacant land properties.

Many Real Estate Agents will gladly take a listing for a vacant land lot of almost any price. The concern is whether they will actually be effective at selling it for at or near full retail price.

But if you have a higher priced land parcel, it may still make sense to hire a Real Estate Agent. We cover more about how to find, hire, and work with an effective Real Estate Agent in our companion document, How to Sell Your Land for More Cash .

Waiting / Second Offers

Our offer amount may change in the future. If we have a good experience with the first group of properties we purchase in an area, it allows us to spend more on the acquisition side for additional properties. If you’d prefer, we can put you on a list to contact in a few months if we’re able to offer a little more at that time. If that’s what you want, just let us know by sending us a message.

Counter-Offers

We’re open to considering counter-offers from land owners at any time. However, we put significant research and thought into our initial offers and it’s fairly rare for us to accept counter-offers. Most counter-offers are expecting us to pay retail or near-retail price while providing the services of a wholesale buyer, which we simply cannot do.

We are more likely to be able to accept a counter-offer if one or more of the following is true:

There is a natural feature of your property (such as a cave, spring, climbing rock, etc.) that is not common in the area or apparent from internet maps and satellite photos or county records.
There is infrastructure available on your property (such as an existing well, septic system, or utility hookup) that is not typical of other properties in the area and wasn’t considered in our first offer.
You have recently paid off significant back taxes that the county still shows as being owed.
There is an inhabitable building or a storage structure in good condition on the property that is not listed in county records. Note that uninhabitable / unusable buildings and old / poor condition personal property such as cars, RVs, etc. typically decrease rather than increase a property’s value.
There is some personal property with significant independent value (working RV or other vehicle, etc.) on and included with the property.
There have been recent developments in the area you are aware of that we are not (such as a new employer or development in the area).
You are willing to do something most sellers aren’t, like accept a large portion of the purchase price as a series of monthly payments instead of cash all at once.
The counter-offer is only a little higher than our initial offer and still within the general wholesale pricing bracket.

If you’d like to make us a counter-offer, you may do so by sending us a message.

Other Land Investors

If you have received one of our letters, you probably know there are others in the wholesale/retail land business. You may have received letters from some of them too. They’ll probably be happy (as we are) to send you an offer on your property so you can compare it to ours. I’d expect the offer amounts to be broadly similar but it doesn’t hurt to compare.

However one important difference to be aware of when comparing offers is to understand whether the deal is a direct purchase or a double close. What “double close” means is usually a 4-6 month purchase contract and then not closing the purchase until a retail buyer is found. When the retail buyer is found, the investor then closes both transactions at the same time – hence the “double close”.

If you see an on or before close date 4-6 months out, that’s probably what is intended. This is the kind of offer we make when the seller states (or we guess) that there is no rush to sell and the seller simply wants the highest offer price.

Double closing allows for a higher offer price but is riskier for you as a seller if you need your money quickly. If the investor doesn’t find a buyer they don’t close, and you’re still left with the land. And it can result in more hassle for you if the retail buyer asks for tests or studies on the land before purchasing. Plus even if the “double close” works, you have to wait longer to get paid because you’re waiting while the investor markets and negotiates with a retail buyer.

Because of these factors, any investor who is double closing is offering you less service than a direct purchase and therefore should be offering you a higher price for your land. If you need your money quickly, be sure to let us know and we will be happy to write a direct purchase offer for most property types. Just be aware that the direct purchase offer price is often significantly lower than the double close offer price. This is because it involves more risk for our business and requires significant capital outlay.

On the other hand, if we offered you a shorter direct purchase and you actually want us to offer you a higher price assuming we will “double close”, please ask us for a double close offer as we can do that too.

Whatever you ultimately decide to do with your land, we hope this guide has been helpful to you. If you still have questions, or if you have comments, suggestions or corrections, don’t hesitate to reach out to us by phone at 520-222-8855 or by using our web contact form.