Accredited Land Consultant Eric Andrews explains days on market and red flags. In North Carolina, buyers of raw land need to pay cash. Land can sit on the market for months or even years. Raw land lacks liquidity. Land has more days on market than residential property.
Interviewer: Do the days on the market matter?
Interviewee: Sometimes, but not all the time. So, last year, we sold five properties that had been on the market eight years or longer. So that’s a long time, but the market was so hot and inventory was so slow that eventually, they went under contract and they sold. So these properties were 100 acres in Silk Hope, it was eight acres in downtown Pittsboro, it was 184 acres in Siler City, 300 acres in Bear Creek and 20 acres in Siler City. All these properties were a lot different.
So if you have a house in Chatham Forrest right now, a subdivision in Pittsboro, and that thing was on the market for 32 days. Yes, that’s a red flag. But I have 57 acres that’s been on the market for seven, eight months and everybody is calling saying, “What’s wrong with it?” What people don’t understand is the only way to purchase these large tracks of land are cash buyers. For example, that 300 acres that I had just south of town. That was a million and a half dollars. It sat on the market for eight years and those sellers were going up on price. We started out at 1.2 and then it went 1.3, 1.4, they kept on going up in price. You have to have someone that has 1.5 million liquid that wants 300 acres in Pittsboro. Not only do they have 1.5 million liquid, but they’re willing to invest that into raw land. So you’re probably talking about someone that has 10 or 20 million liquid if they’re willing to invest in raw land like that.
So, just because a large piece of land has days on the market, doesn’t mean that there is anything wrong with the property, it’s that raw land lacks liquidity and you have to find the right piece of land, in the right area, at the right price and you have to have someone that has the cash. A lot of agents that aren’t familiar with land and a lot of buyers that aren’t familiar with land call us and say, “What’s wrong with this property? It’s been 272 days on the market.” There’s nothing wrong with it. Land has more days on the market.
Similarly, we had a residence next to the fruit cake factory, and this was an 1850’s farmhouse and houses are selling at this time the market was so hot the houses were selling in two and three days. Well this was an 1850’s farmhouse, 10 acres was on one side of the road, 54 acres was on the other side of the road. When it’s 64 acres and for 800,000 dollars and that property was on the market for three or four months. So, that one had a double stigma. It had a lot of days on the market and it was a residential with a lot of days on the market but it was very, very land heavy. There was no way anybody was going to buy that with a traditional mortgage. It ended up being an 80/20 loan. So, that was on the market for four months. We were asking 800,000, guess how much the sellers got. They got 800,000. Just because things have days on the market, should not stigmatize a property if it’s raw land, commercial or a home wood acreage.
