Why Land Owners are Selling at Rock Bottom Prices Right Now (LA 1274)
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Transcript:
Steven Butala:
Steve and Jill here.
Jill DeWit:
Hello.
Steven Butala:
Welcome to the Land Academy show, entertaining land investment talk. I’m Steven Jack Butala.
Jill DeWit:
And I’m Jill DeWit, broadcasting from sunny Southern California.
Steven Butala:
Today, Jill and I talk about why land owners are selling at rock bottom prices right now. Why do you think, Jill? Why do you think?
Jill DeWit:
Well, I’m not going to tell.
Steven Butala:
I know exactly why. I’m going to learn from you on this.
Jill DeWit:
Well, I’m going to give you some numbers and then we’ll talk about it
Steven Butala:
Before we get into it, let’s take a question posted by one of our members on the landinvestors.com online community. It’s free.
Jill DeWit:
We don’t want a 30 second show.
Steven Butala:
Maybe people do.
Jill DeWit:
Maybe people do. Sorry, I’m sorry. For those of you, viewers and listeners who want a 30 second show, not happening, so just-
Steven Butala:
I get emails like that once in a while, do you?
Jill DeWit:
No, they’ll email you. It’s your stuff that comes up on there. If you have any questions or concerns, email here at [crosstalk 00:00:56] is not my email.
Steven Butala:
Can you guys just cut to the chase-
Jill DeWit:
I know.
Steven Butala:
And stop horsing around and just tell us how to buy and sell land?
Jill DeWit:
Make it easier for me. I listen to it at double speed anyway. [inaudible 00:01:08] I never do that. I always forget that, that there’s a way to do that, or they read the transcripts. That’s funny too. Okay. Back to the question. Herbert wrote, “Hello all. I’m having trouble learning how to price counties efficiently. I’m used to shotgunning a whole County, but I know there’s better ways to go about pricing.” Do you want to explain shotgunning real quick?
Steven Butala:
Yeah. So there’s a couple of ways to price a County when it comes to land. You can establish some version of, “I believe that the average sale price in a County is a thousand bucks an acre, so I’m going to send out offers for $200 an acre and sell it for 400 or $500 an acre as a wholesaler.” That’s shotgunning.
Jill DeWit:
Shotgunning is you don’t get specific about the area-
Steven Butala:
The acreage.
Jill DeWit:
About any of the features.
Steven Butala:
You just get it in the mail.
Jill DeWit:
You just say, “You know what? Every single person is going to get an offer from me at this price.” Some of them might be too much. Some of them might be too little. I’ll just see who calls me back and then-
Steven Butala:
And I’ll deal with it then.
Jill DeWit:
And so that’s shotgunning. So then Herbert goes on to write, “How would you price, for example, Pinal County, Arizona, 40 to 20 acres. How do you identify significant differences in price points for certain areas when researching a County? I can’t seem to find a significant difference in market values for the different areas of Pinal County so that I can price by APN or even zip code. I just don’t see a difference. I’m not from nor have I ever been to Arizona, so I’m unsure of more in depth characteristics pertaining to anything that affects our pricing. I’m trying to put my next mailer in the best position to be successful, so any advice would be greatly appreciated in my book. I just want to know the thought process behind going about the steps.”
Steven Butala:
So pricing is the hot topic right now. If you go through land investors, I just did it to put together the questions. Obviously this one made the cut for all our shows this week and pricing is a predominant topic for good reason, because I think Jill and I have been talking about it forever, but here’s the deal with pricing. As we get further into this information age that we’re in, that seemingly probably endless now, or at least for the rest of our lifetime, the prevalence of data dramatically has increased recently on completed sales for all product types, mobile homes, land, it’s always been there for houses, but now even multifamily.
Steven Butala:
So what you need to do is this. You need to establish a system for yourself where you collect various sources of completed sales for land and active sales, so there are sold sales and active sales. All over the internet there’s places to get them, Zillow, Trulia, realtor.com, redfin.com, and those are the big four. In fact, what I’m seeing now is that even places like TitlePro are actually including it with the data, so you can go and certainly find what’s listed there and for what price.
Jill DeWit:
I see that when I pull property reports, I do it all the time, and it shows columns.
Steven Butala:
So if you don’t know it, Jill and I are licensed at Atlanta Academy as licensed providers for this data. So it’s not quite there where you can full blow just go right into data tree and pull down completed sales and use that data, but it will be very soon. So in the meantime, you need to use these other tools to get your pricing down, and find out what’s been sold in a certain zip code, or if you want to do it by County. I would highly recommend zip code. Get completed and active sales, establish a price per acre for that zip code, let’s say, and then, and then write your offer price, back off your offer price from what you think is retail. That’s a long way of saying, “You got to get the data.”
Jill DeWit:
May I add, what would you suggest for Herbert? Because he’s even thinking, okay, so are you saying that, how does he put that data into a region and into an area? He’s like, “Okay, I don’t know the area well enough to be able to zip code price or APN price.” So how do you explain digging into that detail?
Steven Butala:
Right, so the vast majority of the comparison values that you’re going to get on these data sources I’m talking about have what’s called the Situs address, S-I-T-U-S. That’s the approximate. You can use it through GPS. These data sources are nice enough to provide you, it might say 000 County road in Pinal County, or not necessarily Pinal County, but Eloy, which is a town in Pinal County, Arizona, 8525, whatever, and so if you can get the data for the whole County and you can parse it out by zip code and acreage and get the data now like that, you can spend a weekend and significantly improve how you’re pricing properties. So Jill and I usually, we show you exactly how to do it. So for pricing, I’m kicking then can down the road intentionally because this is such a hot topic right now.
Steven Butala:
And I know that there’s a way to collect this data correctly, and we are building in applications to make it real easy, and it’s not going to be free. It will dramatically increase the accuracy for how you price, but I’m not saying wait for this application at all. We have hundreds and hundreds of members that are successfully doing this by what he calls shotgunning. I still shotgun certain places, and his question really is, he’s looking at the county on let’s say realtor.com, and he doesn’t see significant variances per region in that county.
Jill DeWit:
Which is not a bad thing.
Steven Butala:
Then maybe there isn’t.
Jill DeWit:
Sometimes I’m like, “That’s not a bad thing.” There’s stuff you can spot that’s obvious like, “Oh, look around the lake.” Okay. We get that. We all get waterfront. You can figure out, “Oh, they must have a view.” Or even it’s closer to the town. You could pick out, or maybe you don’t. Those are some of the easy things`that I would start with if I didn’t know an area at all, and I’m doing that, honestly I’m doing it right now. I’m not doing the pricing because the offers are, obviously you did the offers and the calls are coming back. I didn’t really look that detailed into the area, into the region now, until I’m staring at the offers going, “Oh, look at this. Now I’m seeing them. What do you say?”
Steven Butala:
It’s good.
Jill DeWit:
Yeah, that’s the way it should be.
Steven Butala:
Exactly.
Jill DeWit:
It’s like, you don’t want to get too into it. Enough into it when you’re pricing, because if you get too into it, you spend a month pricing a mailer and you can’t do that.
Steven Butala:
You shouldn’t do that.
Jill DeWit:
That defeats the purpose here. You’re never get ahead, but you know enough, and then now that they’re coming back to me, now I’m getting in going, “Wow, look how pretty this area is,” and now I’m watching for those too, by the way, and I have some things I can actually share about this when we get into the show.
Steven Butala:
Today’s topic, why land owners are selling at rock bottom prices right now, this is the meat of the show that Jill was talking about.
Jill DeWit:
So as I was saying, I’m seeing some crazy numbers coming back, like offers you sent out, and then one of the things that we do not look at when we send out offers is how much people paid for the properties. That’s something that you don’t necessarily need to do. It doesn’t really matter. I just like to do it when I’m doing my due diligence. I always glance at it and see, what did they pay for this? Because if they paid $2,000 for it two years ago and I offered them $5,000, I might go, “Oh oh, did I do that wrong or did something great happen? And is it a justified new offer price because now it really is worth 20,000? Good for them,” kind of thing.
Jill DeWit:
Or I look at it like, “Did they really overpay? Is this offer maybe not well received?” kind of thing, whatever, or what’s happening now is it is well received and they just paid a crazy amount. So let me give you the story, the situation. So the offers have gone out in a certain area in the country that we’re working on. These letters are coming back, I’m doing my normal due diligence. We have signed purchase agreements and they are less than $5,000, and I’ve got three that came in this week, so really Monday and Tuesday, three came back. I’m looking at these properties. These people spent between 45 and $50,000 for these parcels, and they are in the four to six acre range, and we’re buying them for less than 5,000.
Jill DeWit:
And I’m looking at the screen and I’m looking at like, I can see one of them. One of them would be like, it would make sense, because it’s like, “Ooh, this is the one little home run I found in the area,” but I got three right now. So then it made me alert. I got nervous. So I’m like, “What’s going on?”” So I called two brokers, actually, my team called two brokers in the area to say, “Are we missing something here? Did you guys uncover is this a meth region or I don’t know, is something crazy happening that’s going on in this area?” And the brokers are like, “No.” Two different ones are like..
Steven Butala:
So what are the sale prices, or your contemplated sale prices?
Jill DeWit:
Oh, our contemplated sell prices are going to be probably close to what they paid.
Steven Butala:
So buy for five, sell for 40?
Jill DeWit:
Yeah.
Steven Butala:
Let’s do the math on that.
Jill DeWit:
And they paid 48 to 50 here. I’m like, what the heck?
Steven Butala:
So by the time you get all done with it, they’re all separate owners?
Jill DeWit:
Yeah.
Steven Butala:
Wow.
Jill DeWit:
That’s the thing. It’s not one guy owns three.
Steven Butala:
So, that’s not… You’re right, that’s not just.
Jill DeWit:
It’s three random guys. That’s what made me question it, and so that’s where, we got to do this show. So here’s my thinking behind this.
Steven Butala:
[crosstalk 00:11:31] make probably almost $200,000 on those three properties.
Jill DeWit:
Exactly, well now I’m going back to, “Oh, let me take it a step further. There’s an HOA.” I go, “All right. Is there a crazy HOA fees?” Nope. They’re current. All right. So that’s not the issue. I’m really digging. This is what I-
Steven Butala:
Yeah. You’re trying to find something wrong-
Jill DeWit:
I am.
Steven Butala:
…with your own deal, which-
Jill DeWit:
Exactly.
Steven Butala:
[crosstalk 00:11:53] advice for everybody.
Jill DeWit:
Exactly.
Steven Butala:
I’d do the same thing.
Jill DeWit:
I’m digging. Okay. All right, and I found out it’s like 300 bucks a year. That’s easy. All right. No problem. And they come with-
Steven Butala:
It’s like assessing a relationship.
Jill DeWit:
They come with lake rights. Holy moly. Then I’d said, “Okay, what’s the transfer fees on these?” And there is none, to transfer from one name to the other at the HOA. Again, I’m trying to find problems and I can’t find any. So at the end of the day, my conclusion is these people don’t care.
Steven Butala:
That’s what it is.
Jill DeWit:
And there’s a lot of people out there like that.
Steven Butala:
That’s what the shows about.
Jill DeWit:
That just don’t care. It is not about the money. They are done. It didn’t work out. They’re not going to build their dream house there. They’re going to do whatever, and they just want it off… Tired of getting a tax bill.
Steven Butala:
New people in our group ask these types of questions, “Well, why don’t they just list it with the-” Can you answer these?
Jill DeWit:
Yeah.
Steven Butala:
“Why don’t they just list it with the broker?”
Jill DeWit:
They don’t care about the money.
Steven Butala:
That’s right.
Jill DeWit:
They want the fastest, easiest way to sell this property. They’re like, “Yay. Here. I wish you well. Sign it, send it back.” That’s it.
Steven Butala:
Have a heart, Jill, why don’t you pay them retail value? These are the things that people say to us.
Jill DeWit:
Excuse me. They signed a purchase agreement. They don’t care about the money. They’re happy with it. They’re happy getting their $4,962 and 87 cents or whatever it is. They sign it and send it back for a reason. You really think I’m going to call them and go, “Excuse me, Mr. Smith. I’m so sorry. I should have added a zero on there.” I’m not going to do that. They signed it. They’re done. They’re happy. Would you do that at a yard sale?
Steven Butala:
No.
Jill DeWit:
“No, no, no, no, no, no. That Schwinn bike is worth way more. I have to pay you more.”
Steven Butala:
Right, no, you don’t do that.
Jill DeWit:
Actually what’s funny about that. This is a true story. I sold a car. Remember my blue car? The guy felt bad. I sold it for like eight grand. The guy’s like, “It’s worth [inaudible 00:13:55]” I said, “I know.” He’s like, “I felt bad giving you eight.” I’m like, “I don’t care. I’m happy with the eight.” And he’s like, everybody walked away happy. He really felt like he should give me more money, and I was talking about it and like, “Stop it. I don’t care. We’ve made a deal.”
Steven Butala:
Just want to get it done.
Jill DeWit:
Yeah, that was it.
Steven Butala:
So that’s the deal. And do you think that it’s different now than it was last year from a pricing standpoint, rock bottom prices?
Jill DeWit:
I’m seeing more.
Steven Butala:
Yeah, I absolutely do.
Jill DeWit:
That’s what’s different for me.
Steven Butala:
And this isn’t going to change for the next probably at least 24 months.
Jill DeWit:
Yeah.
Steven Butala:
That’s my prediction.
Jill DeWit:
I’m seeing more people that are just like… We’re all making life changes right now.
Steven Butala:
Yeah, all of us.
Jill DeWit:
We’re all looking at everything in our life, from our kids’ school to, “Do I even really need a second car?” to, “Do I really need this piece of land weighing on me knowing I am not going to go build there ever?”
Steven Butala:
We’re reassessing everything, and when you really do a mental inventory of all the stuff that’s going on in your life and you get down to, let’s call it efficiency mode or skeleton mode, you get rid of the stuff you don’t need. I’m doing that. We’re doing with personal stuff in our lives and getting rid of stuff that we don’t need, like motorcycles and things like that.
Jill DeWit:
You just did one.
Steven Butala:
Yeah.
Jill DeWit:
That was yours. You just rock bottom priced that.
Steven Butala:
Basically gave it away.
Jill DeWit:
Yeah, our neighbor even said, “Why are you doing that? I would’ve given you twice that.”
Jill DeWit:
“Man, whatever. This guy got there first.”
Steven Butala:
Yeah. I didn’t know that.
Jill DeWit:
Uh-huh (affirmative) Yeah.
Steven Butala:
Wrecked my day.
Jill DeWit:
No, I’m sorry. No, no, no, actually, but hold on a moment. This is better because I didn’t want the neighbor out there tinkering with it and you’d be like sad that you see it every day and he’s having fun on it. This is better.
Steven Butala:
If you have ever given anyone a car, it falls under the no good deed goes unpunished.
Jill DeWit:
Don’t give it to a friend.
Steven Butala:
Don’t ever give a car to a friend or sell a car to a friend.
Jill DeWit:
Don’t do that.
Steven Butala:
The first week you’re going to get phone call after phone call about what’s wrong with it.
Jill DeWit:
Oh, I had that with-
Steven Butala:
Even though it’s free.
Jill DeWit:
Dude, I had that with property, remember? I had a friend who wanted to give her son a piece of property. She thought it was so cool. So I said, “Sure.” So I sold her a property for like a stupid hundred dollars. You better believe she complained about the dumb tax bill. I’m like, “Are you kidding me?”
Steven Butala:
I know who you’re talking about, and she deserves it.
Jill DeWit:
Oh my goodness. I will never do that again. I gave you this dumb property.
Steven Butala:
Hey, now’s the time to send out mail. People are really responding. Does that mean you send out mail with $500 purchase prices? No. No, you still price it at 20% like you’ll always have, between 18 and 22% or 25%. You’re just going to get a better response. And find some higher priced property. Find some, like Jill’s found, for 30, 40, $50,000 property, buy it for 20%. This is the time. That’s my point.
Jill DeWit:
Thank you. Happy you could join us today. Every Monday, Wednesday, and Friday, you can find this on the Land Academy show, which will soon be changing, by the way. But for this week, on Tuesdays and Thursdays, we are on the House Academy show.
Steven Butala:
Tomorrow the episode on the House Academy show is called Current Market Stats support Massive for Closures at the end of 2020 for Houses. You are not alone in your real estate ambition.
Jill DeWit:
I cannot tell you how excited I am to tune in tomorrow.
Steven Butala:
You’re going to tune in, Jill.
Jill DeWit:
No I’m going to tune out. I can’t tell you how excited I am to tune out tomorrow. I’d do my nails, but my nails are done, so I can’t do that.
Steven Butala:
Are you going to even sit next to me?
Jill DeWit:
Maybe. We’ll see. I’ll probably be here, because if I’m not here, everybody else will tune out.
Steven Butala:
That’s absolutely true.
Jill DeWit:
[inaudible 00:17:40] The Land Academy show remains commercial free for you, our loyal listeners, wherever you’re watching, wherever you’re listening. Please subscribe and rate us there. We are Steve and Jill.
Steven Butala:
Information-
Jill DeWit:
And inspiration
Steven Butala:
… to buy undervalued property.
If you have any questions or comments, please feel free to email me directly at steven@BuWit.com.
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