Homes and plots of land are hardly exempt from the current frenzy of sales across the United States, and sellers who might have considered a construction project may now find themselves interested in offloading their undeveloped properties sooner than expected. .
Given the recent increase in construction costs, the sale of undeveloped land can now also be a strategic financial measure for sellers.
“Construction costs have gone up a lot, and as a seller you lose some of the risk that you would otherwise have had something built,” said Gregory Malin, CEO of luxury home builder Troon Pacific in San Francisco. . “Otherwise, you might have ended up investing more than you thought, and the construction takes longer and longer.
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However, not all raw plots of land are created equal, and there are a number of tactics that sellers can employ to increase eventual resale value with a much lower initial investment than they would have spent building a house.
“There is great value in selling fully licensed land with [construction] plans, ”said James Harris, agency director in Los Angeles. “A lot of people will have the headache of doing it themselves before they sell. There’s no [uniform] math, but if you bought land for $ 6 million and then add plans and permits, you could probably sell it for $ 10 million. “
Whether you’re looking to do a few cosmetic upgrades or want to dive into a more complex authorization process, here are some proven strategies for increasing a home site’s resale value and expanding the pool of interested buyers before you go. put in place. the market.
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Take care of the paperwork
There is no doubt that managing the basics, from hookups to utilities to building permits, is one of the most important steps a seller can take when marketing raw land. In many areas it is also considered standard operating procedure, and buyers looking for empty lots will expect them to come with all relevant documents in place.
“If you are in the middle of nowhere in Topanga [in California] and having a piece of land that’s been there for 50 years, it might not have water, and it might take years to set in, ”Mr. Harris said. In contrast, in Beverly Hills, for example, such things are absolute given, he added. “You’re going to have water, gas, and you have to get permits to the point where you can start building.”
The exact type of permit required can vary widely depending on location and type of property (California, for example, is known to be a “paperwork-laden state,” said Trayor Lesnock, CEO and Founder of Platinum Luxury Auctions), and can cover a range of issues, including lot size and subdivision; the size and type of construction that will be permitted; and any restrictions or environmental considerations.
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“One of the key things is getting rid of some of the most important unusual aspects that a typical owner hasn’t had to deal with, like if you have plants or animals protected, or if you need to get away from it. certain distances from waterways, ”Malin said. “A lot of times I advise people to go as far as they can with the simple things – can you finalize building permits and not building? Can you provide infrastructure? “
Tasks such as licensing and surveying land are time consuming and can cost anywhere from a few thousand dollars to tens of thousands of dollars – and can last from months to years – depending on location and of the scope of the project. But they can also expand your pool of interested buyers and ultimately increase the selling price of your property.
“Buyers understand how long it takes now to get approvals, so having a property ready to go is probably the ideal situation,” said Shelly Tretter Lynch, a Compass agent in Greenwich, Connecticut. “At the midpoint, I think you’re probably looking at a 20% dollar volume gain on properties if everything is in place.”
Cosmetic upgrades and construction plans
While the traditional “staging” may not come to mind initially in the process of selling an empty residential site, just as with selling existing homes, buyers often need help. to imagine what the finished product might look like.
In the case of raw land, this process can range from basic landscaping to an architect creating a full set of plans for a new home.
“From a marketing standpoint, I like to market it with a potential sitemap,” said Matthew Breitenbach, a Compass agent in the Hamptons. “I have architects and zoning lawyers that I work with, so I can paint this story for someone.”
In a recent sale for a large parcel of land with several lots, Mr Breitenbach said: “We repackaged it with a few renderings and a sitemap for each lot, where each house would be and what it would look like. . A developer has come in, and they don’t make the exact plan, but it gave them an idea, it’s visual stimulation.
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As with any home sale, buyers often respond best to a compelling visual.
“I’ve had development sites where we’ve built these amazing renderings and put them on big easels so we can show people what it would look like,” Mr. Harris said. “In one case, we had 3D glasses, so [buyers] might have experience walking around the house.
In some cases, said Tretter Lynch, sellers will go so far as to select building materials for a property or obtain quotes from a contractor for a future construction process.
“The more information the better,” said Ms. Tretter Lynch. “If a buyer comes in and the land is ready for a permit and has costs associated with building it and they can go out into the stone yard and look at it all, that helps.
Even without embarking on a full-scale construction project, doing a few physical upgrades to the site can also create a significant advantage.
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“If you can create a sense of ownership on the site, you’re ahead of the game,” Ms. Tretter Lynch said. “An alley of trees going up the alley, maybe you put up some stone walls.” Buyers want to have something a little more developed and mature, and if you’re working with a site where it has it, that adds tremendous value. “
Ultimately, deciding how much work to put into a residential site before listing can be a balancing act and will depend on how much time and money a seller is willing to put into the process.
“By taking care of some of those larger, complex items, like putting up a road or finished paving for a house, it will reach a wider audience willing to take a [construction] project like this, ”said Mr. Malin. “A lot of people think they have a lot of imagination, but that’s really not the case when it comes to seeing a house, how livable it is, what the views are, how it all comes down to. get organized. ”
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Mr. Malin added, “Don’t try to do everything. Unless you’re a professional developer, I don’t think you should try to go into the details of a floor plan or start specifying a house in depth. “
And as with the wider sales market, in most cases current conditions are firmly in favor of sellers, even with high construction costs that traditionally could have kept buyers away from construction projects.
“I have a client who started with a piece of land because he couldn’t find everything he wanted, and knew he had to act and buy something,” said Sheri Winter Parker, an agent from Corcoran on the North Fork of Long Island in New York. “The specification market has improved dramatically due to such a lack of inventory. They don’t build land anymore, so people build and build with confidence. “
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