This is episode number 2,145. Jill and I are talking about Why The Heck Would A Seller Choose to Sell Land Below Market Value?

I know.

Me too.

There are a couple of things though. This is almost a two-parter also. Why would they do it and why would they sell to us? I hope we talk about both.

I’m going to start off when we get to the topic. It’s a question with questions. I think it’ll make it incredibly clear. I will tell you this. After a couple of cocktails, people start to talk about what we do for a living, which is happening more and more lately, this topic comes up.

This is one of the top things they go, “Why? What are you talking about? Why the heck would anyone do that?” When we answer some questions, they go, “Oh.”

Discord Question: Florida’s Property Market Trends

It’s a very logical, almost a biological response and reaction to people who own real estate. We’ll talk about it in a second. All week this week, motivation and confidence. Each day on the show, Jill and I answer a question from our Land Academy Discord forum member, and we take a deep dive into land-related topics by popular requests.

Matt wrote for our question, “The 2.43% of the properties in Florida are either listed on the MLS or for sale by owner and that’s not including the pending 2.93% if you throw those in. Charlotte County?”

Hold on a second.

That’s huge.

I want you, the audience, to stop for a second and digest this. Two and a half percent of the properties that are listed in the state of Florida are for sale. What does that mean? The first thing you should be asking, and you should be alarmed. You should ask yourself, “What’s a normal number? How many properties should be for sale?” The universe of properties in any given market is one of the things that we assess before we send mail there. Lower is always better. One-third of 1% is usually my threshold. If there’s anything more than 2/10nth of 1% or 3/10nth of 1% of the properties in a given market that are available for sale, I get very concerned. This is a prelude to something not good. We will answer this in a second. Go ahead, Jill, Charlotte County.

He lists five particular counties here to give their percentages. Charlotte County, 6.1%.

This is a bubble waiting to burst.

Lee County, 4.4%. Sarasota County, 3.6%. Collier County, 3.3%, and Miami-Dade County 2.1%. These sound, what you say, “It’s only 2%.” That’s a lot of properties, though. It’s a big number. I don’t know what it is normally. That’s the only thing I do. You brought that up. What is it normally this time of year?

Point five. This is like 5 or 6 times what it usually is.

We can all go back. By the way, this is what Jack does. Something like this will trip his radar, and Jack will go back and look at all the trending things for the last couple of years.

I did. If you retain one thing, not in this episode of the Land Academy show, but in the entire, 2000 and whatever, 2200 episodes over ten years that Jill and I have been doing, I want you to retain this. There are four cycles in real estate. There have been since the GI bill in the forties of this country, since lending became a thing, which is almost 100 years. These cycles are as follows. Recovery. What are we recovering for? Wait a second.

Expansion. You’re recovering from something bad. Now you’re expanding on it. Number three, hyper-supply. It’s getting overbuilt, which is where we are right now in recession, which you are in recession, where there’s hypersupply. There’s too much property on the market and it’s overbuilt. I am in the process of writing a book that’s going to be released next month.

I spend an entire chapter on this because I learned about this a little late. I learned about it in 2009 because it smacked me in the face and put a massive dent, almost a fatal dent in what I was doing professionally, which is buying land and selling it online on eBay. I met Jill, and we together pulled ourselves out of it without any real long-term damage. It was because I didn’t listen to this early in my career. Recovery, expansion, hyper-supplier, overbuilding, recession. If these things happen or when these happen, the variable is time.

I say, how long are they?

How long each cycle is, and people who are in the lending industry, I would argue they’re they’re the ones who make the most money out of all of this. Not people who buy or sell like us, not renovators, all of it. I’m talking about lenders in all capacity, whether it’s a bank, private equity, or mortgage broker. All of it.

Do things to manipulate the cycle so they can control it. They might lower interest rates. They might increase interest rates. They might get real creative on your down payment or the length of the loan. There are all kinds of things, depending on the cycle they’re in, to have them try to manipulate this. In the end, these four things are going to happen. We are in a hyper supply scenario like this.

The last time it happened for Sirius was 2009, and we were, Jill and I, in the land business then, just like we are now. We chose to buy and sell grossly undervalued houses, which is what we’re doing now. When somebody says 6% of the properties for sale are in Charlotte County, Florida, or anywhere else where you can pull these statistics, you better pay attention to the bargains that you’re going to enjoy. If you don’t have any money, you need to align yourself with somebody who does after you get a few deals that are grossly undervalued. We reviewed one in Florida, strangely enough. In the question, was it today or yesterday?

When somebody says 6% of the properties are for sale anywhere, you better pay attention to the bargains you're going to enjoy. Share on X

This was the question.

We’re still on the question?

We’re still on the question. We haven’t got to the top yet.

That property, those guys found Chris and Chris was half off and accepted an offer at half off. Believe me, it’s going to go lower.

It was Florida. There you go.

I’m not picking on Florida. This is happening all over the country. It’s unique for some reasons because COVID delayed the cycle. The federal government stopped foreclosures during that time. Again, screwing with the cycle. In the end, it’s going to prevail. What they probably did was lengthen the expansion.

Why People Sell Below Market Value

Today’s topic, Why Sellers Choose to Sell Land Below Market Value. Can I take it? Can I push that forward? I want to talk about this, but we’ll talk about it in here.

I want you to know that I don’t want to see what happened to us happen to you. There’s tons of money to be made here in the next 24 months. Let’s put the color.

People see some of these downturns as negative when you and I like, “Great. How much cash can I scrape together?” This is when you start buying like a madman.

That’s correct. Well said, madman.

You had some questions about this?

Why Sellers Choose to Sell Land Below Market Value. Have you ever heard of these places called check cashing companies? Somebody gets a paycheck. They walk into this check cashing company, and they hand them their paycheck. Their paycheck is $1,000. They hand them the paycheck and immediately get $800 back. They sacrifice cash. They sacrifice 20% of the value of their paycheck. They’ve discounted their actual money for the convenience of not doing that. There are a lot of reasons why people would do this. Maybe they don’t trust banks. They don’t want to have bank accounts.

They don’t want it to be trackable. There are a lot of reasons why they do that. I don’t believe that most of them are forced. I think there’s a better way and entities you can sit down with and say, how can I avoid this? They do it. Have you ever had a garage sale or sold something on Facebook marketplace where you don’t care? I don’t care what it’s an asset to something in the garage, you paid $1,000 for it, you’ll take $80. You don’t care. Why would you choose to sell something that’s far below market? It’s convenient. I’m going to post this on Facebook Marketplace. Someone’s going to pick it up. I’ve done this many times. Probably once a month I do this. I just want it out of my life. I’m willing to take an 80% or 90% reduction in the actual value.

Sometimes, people sell something below market value because they just do not care anymore. They simply want it out of their life. Share on X

Sometimes there’s a situation. The second one is something that has happened. Why would they sell property below market value? They lost their job. Somebody passed on. They inherited it. They don’t want it. They don’t know what to do. There are all kinds of situations like that, too. They need the dough, not just convenience. Now, they need the cash, and they need it fast and easy. They don’t have time to get an agent and get some opinions, and let’s get a photographer out here. Let’s take pictures, let’s put it on the internet. Let’s feel the phone calls and walk the property. That could be six months to a year. They don’t have time for that. When they get our letter, they’re like, “What do you mean I can have cash in two weeks?” I can do two weeks of clothes in this area.

Here’s what we’re experiencing as buyers. It’s a different version of the Florida question from earlier. I listed my property for six months, and it didn’t sell. I relisted it for a year, and it didn’t sell. What do you mean you’re willing to pay 40% of its actual value and I can close on Friday? The answer is yes. There are all kinds of valid reasons why people sell their property below market. I’ve accepted this and digested it and offer decades. Before that happened, what shocked me the most is how positive they were about it. I think you’re doing me such a favor. This offer came at such a good time. I’ve got this going on. They’re not saying you’re a terrible person. I hate this, but I’m going to do it. Not once have I ever experienced that?

No, it’s like, “Thank you. It’s good for everybody. We all know it’s worth some more. I hope you go do that, Jill. I hope you make lots of money.” I’ve been hugged and said, “I hope you sell this and make a lot of money. Thank you for getting me out of this jam right now.”

It’s a lot more acute. The thank you is a lot more acute with rural vacant land because most people are out of options. They’ve tried a bunch of stuff, or they don’t care. They inherited it. They don’t care.

They don’t live there.

It’s unwanted.

It’s something that’s taken up. They need the dough more than they need that land. Whatever they were going to do with it didn’t pan out, or it’s not going to work. They cannot do it. Whatever it is, fill in the blank.

It’s acute with the commercial property, too. “I’ve owned this office building for ten years. It’s been half full. I’ve tried everything. I cannot lease it. I might be a person who knows who’s going to be an owner user. Their company is going to move in and utilize it the way it should be, or the same thing as strip balls, or I’ve tried to lease out this RV park or a mobile home park for four years. Now, I cannot do it. I cannot find the right person to manage it. Take the keys, please. I’ll take a loss. I’m going to move on. I know how to build homes. I shouldn’t have bought this in the first place.” Those are the types of circumstances that we are solving as investors.

That pretty much wraps it up. It’s usually a situation. Something is going on and/or I do think it’s a situation, and then convenience comes second. It’s usually a trigger because if they don’t need the dough, they’re like, “I’m not in any hurry.” It’s like, “If I sell it fine, if I don’t, fine.” When they need the dough, then the convenience kicks in. It’s like ding ding. It’s everybody wins.

Next Topic: Most Common Mistakes New Land Investors Make

Join us tomorrow as we discuss the most common mistakes new land investors make. You are not alone in your real estate ambition. We are Jack and Jill. Information and inspiration by undervalued property.