This episode analyzes a ~10-acre southern Alabama property where a seller bought for 34K in 2021 and now seeks 40K exit while the neighboring lot sold for 170K just two years ago. The case study demonstrates why recent on-market arm’s-length transactions carry the highest risk weighting, why neighboring comps lose relevance beyond 12 months regardless of proximity, and how value-add improvements (utilities, clearing, driveways) can create 100K+ pricing gaps on otherwise identical parcels.
Key Takeaways:
- On-Market Sub-5-Year Holds Are Highest Risk Transactions Sellers making profit on properties bought within the last 5 years via on-market arm’s-length sales (not family transfers or quitclaim deeds) represent the riskiest comparable data because they directly reflect market pricing that couldn’t be improved upon.
- Discount All Comps Beyond 12 Months Regardless of Proximity A neighboring lot selling for 170K two years ago carries less weight than recent similar-terrain sales elsewhere because markets change rapidly and the neighboring sale included 20K+ in improvements (utilities, clearing, driveway) plus possible undisclosed mobile home value.
- Value-Add Creates Non-Comparable Pricing Gaps Power hookup, public water connection, driveway installation, and home-site clearing can add 50K+ to otherwise identical parcels, making direct price comparison misleading without adjusting for these specific improvements.
This framework for evaluating comp reliability (on-market arm’s-length most reliable, off-market medium risk, not-arm’s-length least risk) prevents overweighting convenient but misleading neighboring sales data.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. So I keep wanting to introduce some more case studies of land deals, either ones that we’ve fully completed or ones that have come up recently, because that’s our specialty, right? So we see tons of different situations come up and
easy areas to get tripped up in. So one that came up yesterday, so this was on Alicia Jarrett’s Deal or No Deal session bi-weekly on Tuesdays at 3 p.m. Central. If you’re interested in joining some of those, myself and a few of the other…
known funders within the land industry space kind of go over people’s deals and critique them accordingly. It’s been a pretty positive experience for all involved. If I do say so myself and a lot of teaching can happen accordingly. So, you know, there was one that showed up I thought was pretty interesting deal. It was roughly
10-ish acres, a little bit more than that in southern Alabama, actually a county that we’ve worked in before. There was a bit of slope to it, mean, quite rural, but did have road access and power, maybe even public water lined up to it. It was a little unclear about that. Yeah, I mean, the slope wasn’t
perfect, but it wasn’t like a complete detriment to not be able to build a residential house on it. So a few interesting notes about this property. One is that the current donor had bought it for $34,000 in sometime in 2021. I want to say it was mid 2021, but either way that was like,
full bull run year regardless. And he wanted to sell the property that the seller wanted to sell the property for 40,000. You know, now roughly fourish years later. So usually, and I know I’ve commented on this many times before is that you really want to be cautious about buying any properties from
sub five year holds from a seller. particularly if they are making a profit on, the property. yeah, you have to be cautious. You have to look at, okay, was the transaction arm’s length or not? Arm’s length means, you know, was it a close family relation or friend or whatever? Possibly quit claim deed.
Um, that would not be our arm’s length or, you know, if the seller is just kind of transferring properties between a trust they might control or a state and so forth. So you have to be, um, you know, do your diligence looking at, uh, the names of those involved. And sometimes, you know, family relations might not have the same last name or anything. So, you know, still have to be cautious of that, but, um,
If it is a not arms length transaction, I’m usually far less concerned about that just because, you know, the dynamics are much different. It’s not necessarily reflecting market price, but, if it, especially if it was an on market sale, within the last five years, that gives me the most concern and being arms length. if it was an off market sale and still arms length, that’s probably in the medium range out of those scenarios where.
You know, it’s not necessarily representing market value. Maybe they are just trying to offload it. It could have still been to, you know, like a neighbor in the area who knows how that transaction was facilitated. So a little bit more gray area there. But in terms of again, just to summarize it, most risk is on market. Arms length transaction.
Middle ground is off market, not arms length transaction. then least risk is not arms length transaction that, that occurred at that point of sale. So just want to keep that in mind. And then another pretty interesting part of this deal and what sometimes can be a red herring is that the very next door neighbor property with
near identical characteristics in terms of like the actual terrain sold almost exactly two years ago for 170,000. And that one was on the MLS publicly listed. A couple of key notes about that is that they did have power hooked up, which shouldn’t really impact the neighboring lot. That should be easy to get wiring over there. They also had public water connected fully.
onto the property, had a driveway and some clearing done for a home site and they had some type of covering for RV units. Not like a crazy improvement or anything. I doubt that would add more than like roughly 20 grand or so of value add, but you know, the driveway and utilities and so forth, making it more turnkey, the clearing for home site. Plus, you know, they got the driveway up.
on a ascending slope. So that was a fair amount of work. But, you know, considering the neighboring property, if you’re buying at 40,000, do you think, you know, even if you cut off half the price of that 170 K from two years ago and, you know, early 2023 wasn’t like the best market either that was already inflationary high interest rate environment. So it wasn’t
quite the bull run that was pre-mid 2022, for example. So then it becomes kind of interesting to consider that. To me, regardless though, there was enough value add there and we’re not sure like maybe there was another…
Or, I think that 170 K sale also had a mortgage attached to it. So you’re never quite sure whether there was a like land home transaction, maybe like a mobile home were included in it. You know, the updated aerials didn’t seem to indicate that, but you have to be cautious when there seems to be like a pretty significant, uh, additive portion in, um, value to similar lots that is like out of range of what
might be seen in, surrounding acreage. and even if like, you know, a home portion wasn’t listed on the actual listing, you can’t necessarily know for sure. Cause maybe they put that part of the deal together, outside of the,
you know, purchasing the land piece. So, and it was still included like, okay, yeah, this piece of land sold with some of the value add, but not necessarily indicating, hey, like mobile homes coming with this. So you could try reaching out to that realtor, figure out what the situation was, um, which would be recommended. Um, uh, but you know, something to consider, but you know, even if it’s a next door neighbor lot, virtually in every case, anything beyond a sold comp of, you know, 12 months lagging.
I’m going to discount unless there’s really no other option. And either way, I’m going to significantly discount anything. I’m just cause you know, markets change so rapidly and you know, even if it was next door, like two years ago, you really can’t count on that market being realistic for whatever today’s environment is. so it’s easy to like look at one property. That’s not even a one-to-one identical piece.
especially with the value add on there and like kind of treat that and overweight it in favor of what you’re buying a neighboring lot for. And it can be a bit of a red herring from value. So even if I’m looking at other more recent comps that aren’t necessarily as close, but you know, similar terrain and so forth, I’m still going to take those as primary when I’m assessing the
per acre value of the surrounding region, assuming those types of sold comps are available. It’s worth noting that neighbor one, but like that wouldn’t be the primary. Whereas I know a lot of newer investors or even more experienced ones be like, yeah, know, next to a neighbor sold, who cares what sold date was, or at least, know, within the last five years or so, they still might attribute a lot of value to it. I would just be very cautious about that. So
Um, looking at the surrounding sold comps, seems like similar terrain could still move for, um, you know, 80, $90,000. So, you know, even buying at 40 K, you know, the seller’s getting profit on it and still seems to be selling on their market. Um, value, it still seemed like a pretty good deal to me. I’m just, uh, introducing the caveat that I would consider.
other more recent comps, but still of similar terrain to be of higher priority versus getting stuck on that neighboring lot. that also had a whole bunch of other things going on with it. Again, you could check with the realtor and see what happened with it. Like really double down more in there. that would be smart, especially in today’s environment. But, you know, just wanted to, mention another, case study that I think would be helpful as you are looking at.
various situations like this. If you’re looking for funding SeriousLand.Capital, zero cost review of your land deals at Land Daily Deliverance Facebook group. Remember on April 17th, myself, Dave Denniston, Justin Sleba, we’ll be hosting a hot seat on conference session for two of you land investors. So if you want a dedicated hot seat session, getting coached by
Uh, ourselves as industry experts, we’ve been doing this a long time. Uh, let me know ASAP. Um, those spots are going to go quickly here. Uh, and then landpricer.ai, a bunch of big meetings, including with the land ID partnership team in like roughly an hour here. So more to follow up on in regards to that, uh, with that subscribe and share, take care of everybody. Bye.
