Everything That You Need to Know About Selling Development Sites
Everything That You Need to Know About Selling Development Sites
Real estate agents often focus their attention on selling established properties. But those that do may miss out on some big opportunities. Selling development sites can prove just as lucrative. Here’s what you need to know about the process.
Real estate agents are well-aware of the traditional home selling process. You create a listing on behalf of the seller and attract interest from buyers. You’ll negotiate with these buyers on behalf of the seller until you reach an agreement. Then, you deal with all of the paperwork that comes with the transferral of property ownership.
It’s a process that’s been set in stone for decades. New online tools have helped you to expand your reach. But the nuts and bolts of selling a home haven’t really changed much. It’s all about communication, negotiation, and compromise.
Simply put, you know the market when you’re selling an existing property.
But what about if you’re selling development sites?
The opportunity is far more substantial:
- First you sell the development site to a developer.
- Then you sell each of the new dwellings
- Then some of the new dwellings end up being on your rent roll
- And finally some of the buyers will be selling their current property to invest in one of the new properties you are selling!
A lot of what you know and do goes out of the window when selling development sites. The market you’re appealing to is very different. This means real estate agents must create new strategies to get their deals done.
This article offers up some tips for selling development sites. But first, let’s look at why it’s so different from selling a regular property.
Why It’s Different
The first major difference in selling development sites comes in who you’re selling to. With traditional property, you’re usually selling to one of two people. There are the owner-occupiers, who are looking for somewhere to live. And then there are the investors. These people want to find a property that will generate a profit.
Each of these types of buyers has specific aims. This makes it easier to market the property that you’re trying to sell. You can provide all of the data that an investor needs to convince them that the property will generate a return. Or, you can convince the owner-occupier that the house you’re selling can be a suitable home.
But you’re appealing to a different audience when selling development sites. Land buyers are either property development professionals or individuals who want to build their own homes. They’re not looking for something that’s ready-made. Instead, they’re looking for the potential that the land has.
No developer wants to build in a struggling area. That just leads to them spending money on building properties that won’t sell.
Your job as a real estate agent is to show the buyer why the development site is so desirable. Perhaps it’s in an area that’s undergoing major infrastructural improvement. Or, perhaps the land offers suitable space for urban farming or something else that appeals to a niche audience.
Here’s the point. You’re not just selling the land. You’re also selling the potential that the land offers to the prospective buyer.
Secondly, you can’t sell the physical structure when you’re selling development sites. There’s not an attractive kitchen for the buyer to explore. You can’t tell them how many bedrooms the property has or help them to see themselves inside it. There’s nothing on the land but the land itself.
As a result, you’re selling a visual, rather than physical, property. Your sales techniques must change from selling what’s there to what could be there. And what could be there differs depending on the size of the development site and its location.
Finally, there’s the most practical difference. There’s less demand for real estate agents who are selling development sites. This means you’ll have to exercise a little patience when searching for opportunities. Moreover, you must make the most of every sales opportunity that comes your way.
It’s fair to say that selling development sites can be more difficult than selling established properties. Agents must work harder to show the potential that the land possesses. They also have to convince the buyer that it’s worth their time to invest time and money into building.
This creates a lot of challenges that aren’t present in traditional real estate sales. If you’re thinking of selling development sites, use these tips to help you along.
Tip #1 – Know What Your Buyer Needs to Know
As mentioned, you’ll encounter a different type of buyer when selling development sites. They’re not looking for a pre-built property. Instead, they’re looking for land that suits whatever they have planned in their heads. This means that they’ll come armed with a bunch of questions.
If you don’t have the answers, you’ll fail to make the sale. The buyer will assume that the land doesn’t suit their needs, even if it’s actually ideal for them.
So, what does the buyer need to know? That’s a difficult question to answer because it varies depending on the buyer.
As a result, it helps to build a buyer profile before putting the site on the market. Figure out what your land has to offer. This could be rural acreage, a strong location, or any number of other things. Then, figure out which buyers will have the most interest in what the land has to offer.
From there, you can figure out what sort of questions your prospective buyer may ask. Try to think like the buyer to work out what’s going to be most important to them.
You may need to offer information about local schools and other amenities. A developer may have specific questions about zoning permits or utilities.
Here’s the point. There’s no singular method for selling development sites. Each site has something different to offer, which means you have to change up your strategy. Knowing your potential audience and what it’s looking for is the first step. From there, you can find the answers to the questions they’ll ask before they even ask them.
Better yet, having quick answers to their questions shows your buyer that you understand them. This creates trust early on in the relationship. And, as real estate agents know, trust is a crucial component when selling anything.
Tip #2 – Talk to the Local Council
Your local council is also a vital ally to have on your side when selling development sites. They’re your best source of information when it comes to permits and permissions for the site. They can also tell you important information about upcoming developments in the local area.
Arrange a meeting to discuss the site with a council representative. You’re looking to create a friendly relationship that facilitates the sale. After all, having the local government as an enemy creates serious problems. You won’t have access to the information that you need. Plus, your buyers will struggle with the land and getting their questions answered.
Talk about the plans for the local area and any difficulties the land may experience. Try to find solutions to those problems instead of placing them on the buyer’s shoulders. At the very least, have knowledge of these potential issues so you can offer accurate information to your buyer.
A lot of zoning information is now available online. Online platforms like Archistar.ai (full disclosure - our company created this platform) show zoning information for sites and also allow you to play with different scenarios.
Tip #3 – Consider Dividing It
Let’s say that you have a large development site that’s not attracting attention from property developers.
What can you do in that situation?
Often, the answer lies in changing your target audience. A property developer may not have an interest in the site. But it’s possible that several individual buyers may want to find out more.
Consider asking the vendor to subdivide large parcels of land if you’re struggling to sell. This allows you to create multiple listings that attract a larger audience of potential buyers.
There are a few things that you have to do before dividing the land though. The most important of these is to get a land survey. This survey will tell you more about the land and allow you to divide it into better parcels. For example, some parts of the site may be most suitable for house building. But some parts may have other uses that allow you to broaden your marketing scope.
Don’t assume that a large development site has to go to a property developer. Smartly dividing the land could help you to sell to a completely different audience.
Tip #4 – Prepare the Land
This is where traditional real estate and development site selling have something in common.
Preparing the land is just as important as staging a traditional property. If the land looks overgrown and unusable, you create a poor first impression. It often doesn’t matter how much potential the land has. A bad first impression may put your buyer off before the conversation begins.
This often requires a bit of heavy lifting and manual labour. Get rid of all of the weeds that may have grown over the years and get everything looking neat and tidy. Dispose of any trash that’s accumulated and take measures to protect the site. If it’s easily accessible, that means people can use it for dumping whatever they want. Some fences or other markings to display the land’s boundaries can take care of this. Plus, they give the buyer a definitive view of what they’ll get with the land purchase.
Think about what you’d look for if you wanted to buy a development site. If there’s anything on the site that doesn’t appeal, get rid of it. You may have to invest some time and money into beautifying the site. But that will pay off with the great first impression that it creates.
Tip #5 – Help With Financing
Lenders are usually wary of buyers who want to purchase development sites. This can make it hard for a buyer to attract financing, even if they want the site.
Anything that you can do to help in this situation will help you to sell the site.
Consider creating a partnership with a specialist in development finance who can help with development financing to a potential buyer. Alternatively, rapidly offer the buyer any information that you can provide when it comes to getting a loan. Deliver the information that they need as quickly as possible. Create a brochure that details the benefits of the land and a high level feasibility report to show the potential. Your buyer can then present this to a lender to justify their purchase.
Our Archistar.ai platform can help with rapid feasibility studies.
Tip #6 – Talk to the Neighbours
You don’t necessarily have to attract new people to the area. In many cases, you’ll find that the people who already live there have an interest in the development site.
Take some time to chat to the people who live nearby. You may find that some of them will consider buying the site themselves. If you’re lucky, one of the neighbours will want to create an extension of their property. Or, there may be an investor or developer nearby who didn’t know the site was up for sale.
Spend a day or so talking to the neighbours. You never know. You may not even have to list the site if you can find an interested party living nearby.
Selling development sites presents a range of challenges that you don’t get when selling property. You’re selling a vision of what the land can become, rather than what it is right now.
To do that, you must employ some different strategies. These include:
- Figuring out what your target audience needs.
- Building a relationship with the local council.
- Preparing the land to look the best that it possibly can.
- Figuring out how you can help with financing.
- Talking to neighbours who may have an interest in the land.
Of course, it also helps to work with online tools to streamline parts of the process. That’s where Archistar.ai comes into play. Archistar.ai allows you to find and explore development sites in your area, generate real-time options of possible building designs and perform due diligence.
Do you want to find out more? Get in touch with an Archistar.ai representative today to receive a personalised demo.
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Posted on 10 Dec 2018