This episode dissects a disastrous Washington state flip where an investor bought a 19-acre parcel for $377K (which had sold for $350K in mid-2021 during peak market) and attempted to flip it four months later for $424K after adding well and septic permits. The property had originally been listed at $650K in October 2023 before a $273K price drop to $377K, signaling severe market misjudgment. Now listed at $399K after 250+ days on market, the investor faces commission costs on the inflated price ($399K × 6% vs. intended $90K net) and near-zero margin even if sold, with closing costs eliminating any profit on the nearly $400K cash outlay.
Key Takeaways:
- Never Use Post-2020 Sales as Comps Without Context: Properties sold between late 2020 and mid-2022 reflect boom pricing that doesn’t establish reliable market clearing levels, and any parcel sold within the last five years requires scrutiny of listing history, price cuts, and days on market before trusting the comparable.
- Relisting Within 12 Months Triggers Buyer Skepticism: Immediate MLS relisting after purchase (especially in disclosure states) signals potential problems to buyers and agents who can see the recent transaction history, creating adverse selection perception that depresses offers regardless of actual property quality.
- Sub-15% Gross Margins Are Unworkable for Listed Properties: Attempting a $50K spread ($424K list on $377K basis) ignores 6%+ commission on the higher sticker price plus closing costs, leaving perhaps $20K net before state taxes, effectively guaranteeing failure when any market friction occurs.
Tune in for the complete breakdown of every mistake in this cautionary tale and how to avoid becoming the greater fool in your own deals.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. Today, I wanted to go over an example of how not to land invest here. FYI, this is not a deal that we did. It came up as a comp when I was on Alicia Jarrett’s
Kind of deal funding club that she runs bi-weekly with her clients on Tuesday afternoons. If you’re interested, it’s I think worth checking out. It’s got myself, Brad DeGraw, Mason and Dan Haverkost, a few other funders and basically take a look at deals and work through.
whether they’re possibly fundable or not. Similar to how I do the lending of the daily diligence, split between some other funders. So I try to go a little bit quicker, but some additional exposure to live deal reviews. If interested, you’d have to reach out to Alicia about that though. So I’m laughing because of how this is just…
It’s such a bad deal. What happened here? And I obviously don’t know the full story, but I can kind of peel back enough layers because we’ve seen enough similar to understand what happened here. So I know I’m kind of burying the lead, but just to position where we are here, this is in Washington state, north of Seattle, you know, high demand county on average here, you know, lot of
juiced up values from price per acre perspective. And this particular investor was looking at 12, 13-ish acre parcel. It had a little bit of questionable access, had to have an easement off the road. But otherwise, I had some clearing that there was some potential there was an active market. And they noticed that there was a roughly 19 acre, almost 20 acre lot.
that had sold less than a year ago for almost $400,000. And so then they were trying to reverse engineer, okay, know, this this parcel that they’re looking at, the road access isn’t as good, but you know, there could be something here and, you know, there were plenty of other large-ish.
parcels that were moving on the market too. So, you know, I there was an opportunity. However, upon closer look is that parcel that was sold under a year ago is actually active on the market still too. So peeling back the curtain, I have it open here. is just, there’s so many lessons about how bad this deal is. I’m going to try to.
I could probably do a whole podcast on each one. And I think I’ve spoken about some of these in different podcasts. So we’ll do a little bit of rapid fire on why this one is so bad. First, it had sold for 350,000 in mid 2021. So super hot land market. As you guys know, I comment routinely that
Parcels that have sold within the last five years, you have to be very careful about purchasing. that’s a rough guideline, five years-ish. More recent, a transaction, the more risky it is. And especially like post-COVID run-up of prices, because we know late 2020 through mid-2022 is like really hot land market, inflated prices.
big sellers market across most of the country. So that’s already a warning sign here is that, okay, somebody sold this parcel for this amount of money kind of setting a market in a boom time. And then it was listed active. I have no idea whether this was attempted to be a flip or not, or maybe the owner just changed.
what they were planning to do. And this is just, you know, it’s a raw piece of land, decent road frontage, really nothing else to it, a little bit of clearing, but it’s not really, you know, turnkey set up for any residential. It’s just in a nicer part of the country. So then roughly two years later, so we’re in late 2023, it was listed active for $650,000. So, you know, okay, wow, could they really move this thing for such a huge run up?
Again, this is when the land market had already turned a bit when it turned back into a buyer’s market. Probably not going to be able to get that much appreciation almost anywhere in the country. Within the last five years of trying to move another property so quickly without doing any significant value add or forced appreciation from a subdivide, anything like that. And then they changed the price to.
$377,000 in December. So it was listed in October, 2023. And then two months later, a near 300K drop in pricing from the seller. you know, it’s unclear why they did that. Maybe they just found, you know, I guess they were figuring out, hey, there wasn’t really a market here. Significantly misjudged it.
They had bought it again for 350,000 in mid 2021. Maybe they’re like, yeah, I just need to exit, get my money out. Who knows what their situation was. Um, feeling a bit more motivated. Uh, and then a month later in January, 2024 now, this is almost a year ago as this recording, uh, it went pending and then sold for that list price, that $377,000. And this is confirmed in land ID and the official records that that’s, it was actually fully closed out.
at that price and. Okay. So we’ll, we’ll, go to a couple of these lessons here again. I’m just, I’m just chuckling. So I, I feel this guy’s pain, what he was trying to do here. and it’s a little unclear what the intention was. My understanding is looking at the current listing as it is now, they, got a well permit and septic permit in place. I’m not sure if they were in place prior.
to when this most recent person purchased it, but the property went live again on the MLS less than four months later. So this is now July of 2024. It was listed for $424,000. So, you know, roughly a 50K bump on what this person just bought it for, which already is just like.
That is a super tight spread, especially when you’re not wholesaling it. You already bought the property, have title outright, spent almost 400 grand cash. And it looks like title transfer too. it’s possible there was some seller financing going on there and title had already transferred into the, you know, the financier’s name. don’t think that is the case. I didn’t check close enough for the official records. So they could have de-risked themselves a little bit, but
Let’s just assume worst case scenarios that they laid out nearly 400 K to buy this property and then was then trying to flip it. Um, you know, doing a little bit of value add for some permits for about a 50 K, um, bump on what they bought it for. And you have to account for all the closing costs on both sides. They’re listing it on MLS. They’re going to have to pay realtor commission at least 6%. Um, which I’m to do the rough math here. Uh, 424 times 0.94.
So all of a sudden, you know, net of commission, you know, they might be walking away with just under $400,000. So, you know, all of a sudden you’re only looking at like a 20K net return on your investment, probably a little bit less, including closing costs. the margin is, it like makes me start to sweat thinking about how crazy this.
this thinking was in terms of trying to offload this property again and thinking that they could get enough margin on this deal and not trying to do a double close. And it clearly wasn’t moving at that 424,000. So they changed the price now to 399,000 as of late November of last year. And it hasn’t moved. It has some activity. It’s not like terrible activity, but obviously they haven’t gotten a taker considering it’s mid-March. So one, two, three.
Almost four months after that other price change. now it’s starting to approach. many days on market? Yeah. Two almost 250 days on market. Bad sign. Really bad sign. so that’s kind of the status of this property and, and now to reverse engineered a little bit, why you can’t rely on, a comp like this, because
It looks like this was a shorter term investor. And, you know, we get sent some of these active listings all the time where it’s like, Hey, you know, there’s this active listing here. Um, you know, sellers willing to take, you know, half of what they have it listed for. Um, to me that that’s a bad sign. That means that the seller hasn’t gotten any other, even low ball offers. They’re, they’re just trying to move on from this property. Obviously they would have taken a higher offer if, if it was on the table. Um, and I remark on this a lot more.
thoroughly in other podcasts. So, you know, I’m just running through what I think this investor was thinking about. He’s like, Hey, you know, this property was listed for 650,000. They cut it almost in half. Wow. What a steal. They must be motivated. I’m to go ahead and buy that and then try to get a quick exit. Maybe juice my margin a little bit more. Do a little bit of value add on it. You know, walk away with 20 plus grand.
wipe my hands of that and move on to the next one. I’ve got a hot area and go from there. that was probably their thinking. but it’s, it’s just not that simple, especially when you have such narrow margin there. And the problem is, when you buy an active property like that, and then, you know, immediately relist it. And especially if you’re not doing like really significant value, I like.
clearing or subdividing, turnkey home site, but just a couple of permits. Like seeing that, and any even unsophisticated buyer on Zillow or Redfin, especially buying agents, they’ll be able to see the recent listing history and they’ll see, wow, and this is a disclosure state too. You can’t even hide the sales price. So they’ll see, this thing just moved less than a year ago for a little less than 400,000 and now they want to list it again.
and they cut the price, like what’s wrong with this property? Why is this new owner trying to move on from it? You start thinking, is this a lemon here on the property? Like you have to put yourself in the buyer psychology of what a recent relist looks like from the perspective of what your end buyers are. Like that’s why I say, it’s really, really risky to buy things on market and then just, know.
without doing significant value and try to, try to relist or, you know, maybe decrease margin a little bit like that. I’ve played that game before. It is hard to win. I avoid it whenever possible. But I’m almost positive. That’s what happened in this case. And the reason we can’t use this property as a comp reliably for the other property that was like kind of across the street is that
the investor who bought this property, you know, could have been the only buyer who was willing to come in at, you know, that $380,000 piece because, know, he thought he was getting a good deal and could get some margin on it, but clearly, and I’m saying key too, cause I, like, I know looking at the seller’s name, it’s, it indicated that. So, you know, just to make that clear, but, you know, he’s clearly not getting offers for anywhere near that 400,000 or anywhere.
where it seems he could even break even on this deal. So we can’t reliably use that previous sales price from under a year ago, because this was kind of like a great fool situation. This investor fooled himself and tried to set the market for other, well, other investors can’t utilize a fool’s purchase to consider in a comping situation.
because they’re not a real market for the property or for property in that area. It’s possible, yeah, you could find another fool to take yours, but that’s a fool’s game, if anything. So that’s why you have to be very careful about looking at the history of a listing and understanding, can this property actually be considered a real comp or not? And what actually happened with it.
And that’s the thing too, when you look at the price per acre, know, okay, they bought it at like, okay, 19,000 per acre. Everything else in the area, maybe a little bit smaller was going like for 30, 40, maybe even 50,000 acre, you know, a bit more superior in terms of characteristics. We’re like, oh yeah, you know, I’m getting this at a big discount here, but in reality that specific micro market was just not as attractive as some of those other properties. And so.
It just ended up being a terrible situation for this investor who, you know, just laid out 400 grand to try to, you know, earn 20. Just a terrible, terrible trade in this market. Like I cannot imagine this guy sleeping well at night. yeah, I haven’t been in a situation this bad, but I’ve been in situations where, know, when, when Dispo is going wrong, that is the most stressful part of land investing business. When you know, you really screwed up a purchase, especially a high price.
price point like this one. I totally feel this guy’s but man, this, is.
probably just one of the best examples of how, again, not to invest in land. He’s just made every mistake in the book. Maybe he’ll survive for the next one. Maybe he won’t. But again, good lesson for how easy it is to get turned upside down in this business. Land is a risky game. Don’t let anybody tell you otherwise. Look at how much churn is in this industry. People come and go every week. It takes dedication and focus to succeed for even a year, let alone
five, 10 years or decades beyond that. so let this be a listen to you all. with that serious land.capital for any of your funding needs. landpricer.ai we actually got, know you guys may be listening to that podcast yesterday. had a more difficult conversation with the team. we’re, we’re back online.
I’ll give you an update soon about that, but landpricer.ai beta test should be coming out early next week and land daily diligence Facebook group for zero cost review of your land deals. We’re gonna be live again tomorrow with that. Take care, bye.
