When it comes to buying land to build a custom home, there are a lot of factors to consider: location, access, cost to clear the land, cost to run utilities, and so much more. And finding land can be much harder than finding a house for sale, because land isn't always listed for sale in the same ways. So when you find the right land, you don't want to miss out.
Let me tell you a story about Mark (not his real name). He found the perfect piece of land to build his forever home on. It had all the features he was looking for: seclusion but with good access to a major road, some trees, just the right amount of slope, and a small pond.
The land was for sale, and it was priced within the range of market value, although near the top. Being a shrewd negotiator, Mark made a somewhat low-ball offer on the land and figured he would negotiate up and meet the seller somewhere in the middle. Worst-case scenario is that he would bite the bullet and pay asking price, right? Wrong.
The seller got multiple offers on the land. After all, Mark wasn't the only person who noticed that perfect piece of land. The seller took the highest offer, which turned out to be slightly higher than asking price.
If the definition of "market value" is the price that a buyer is willing to pay, then Mark misjudged market value so much he took himself out of the running entirely. Imagine the conversation he had to have with his wife when he gave her the bad news.
So how do you avoid this scenario? Here are a few tips.
Do your homework
Figure out what the real market value of the land is. Start with comparable sales nearby, and then take into account the size and features of those properties in comparison to the one you're looking at. For example, if you're comparing land that doesn't have a pond and the one you want to buy does, then give the land you're looking at a fair value for that pond. Same goes for things like road frontage or any other factor that might make one piece of land more or less desirable than another. If the land has features you think are desirable, chances are other potential buyers will think the same, which will drive up the value.
Find out how long the land has been for sale
If it just went on the market and your research says it is priced near market value, then low-balling an offer probably won't work. On the other hand, if it has been for sale for a long time (several months or more), you might be able to negotiate.
Think about your priorities
If you're buying land for your forever home, do you want to risk missing the perfect piece of land to save a few thousand dollars? Is feeling like you got a good deal better than knowing you got the right piece of land? Sometimes we're so intent on not paying full price we lose sight of the big picture. Identify your priorities up front and make decisions based on those priorities.