This episode examines the dangerous pattern of operators getting sellers under 60-90 day option contracts, listing properties aggressively, then scrambling for equity funding when buyers fall through days before contract expiration. A specific example involved a $46K waterfront property under option with an $80K buyer who dropped out, leaving the operator requesting emergency three-day closing from funders without providing prior listing history, marketing details, or acknowledging the black mark created by the failed first listing.
Key Takeaways:
- Short Option Timelines Create Desperation Plays Sixty to ninety-day option contracts leave no buffer when financing falls through—operators end up seeking equity funding under extreme time pressure with compromised negotiating position and incomplete information.
- Sub-2X Margins Are Automatic Rejections in This Macro Buying at $46K with an $80K offer (1.7x gross margin) provides insufficient cushion for current market conditions, black marks from failed listings, or price reductions needed to move inventory.
- Relisting After Failed Closings Creates Permanent Black Marks When properties immediately relist after falling out of contract, buyers smell desperation and either avoid the deal or lowball—equity funders inherit this damaged listing position while taking all the carrying risk.
Listen to the full episode for the complete breakdown of why option contract desperation plays fail.
(Podcast transcript below)
Hi, Chris Duff at Serious Land Capital, vacant land funding partner. today returning to a fairly routine topic with, additional info is just the tendency I see around the land industry of getting sellers under option contracts to attempt to get, double close completed.
And then running out of time and trying to scramble and complete an equity or possibly debt funded deal or, you know, just closing with your own cash. Though I don’t hear about that quite as much, obviously. And how many complications that can kind of cause.
when you’re looking for an exit on a property. So to give you an example, again, and I know I’ve covered this topic a number of times, I see it so often that it’s just worth returning to because there’s so many red flags here that I think you really put yourself in a very risky position trying to build a business this way. So what I’ll oftentimes see is that
Again, somebody will get a seller under an option contract. They’ll list the property. Hopefully the marketing is good. If you’re going to get it under option, you better go all out to try to move this thing quick. And I know the going timeline is typically, buy yourself six months on the option as a general recommendation to kind of give yourself plenty of buffer room, especially to close.
Um, cause otherwise, you know, assuming it takes 30, 45 days to actually close a property, uh, you know, you’re really going to need buyers to come in quick in a, you know, it’s still pretty difficult macro, um, to, uh, actually move things that you are listing, um, under, you know, potentially tighter turnaround. So I’m seeing a number of folks that.
seem to be buying themselves only like 60 to 90 days on the option contract. If that’s all you can get from the seller, mean, fine. You just have to operate with the constraints of those parameters. But for instance, like I saw this property that was under contract for, 46,000 and
They had, it was like a decent lot. actually had some, it was waterfront property and they had a buyer at 80,000 set to close and financing fell through at the last minute. And then they reached out to us because their option contract was running out.
within a matter of like three business days and like, hey, I really need you guys to close this. You know, buyer was there, dropped at 80. We’re, you know, we’re anticipating closing and then, you know, can relist higher at 110, but they didn’t include any of the info. Okay. What did they initially listed for? How long was it listed? What did the marketing look like? And I didn’t have access to any of the prior listing info.
No response after, of course. And, you know, so I followed up and, you know, I was asking some of those questions. But, you know, also if it’s going to be a super quick close like this, yeah, I’m not a hundred percent opposed. Like the deal is good enough. We will close that quickly. But in this case, I really, you know,
even without knowing that other info about how long it was on market and what for, there’s going to be an inherent risk of completing an equity purchase, meaning, know, legally, the original listing is still going to be showing up. But then if we were to sign a listing agreement, it would still show up as that same property, just another
fresh listing on the property and buyers seeing or buyers agents seeing that the property was just listed for, you know, still some unknown price. don’t know whether the new anticipated price was going to be higher or lower. Again, that’s info that I would have wanted to know. And so that naturally puts us even at higher risk. There’s a black mark on the property. Okay, why did it just come down? Now it’s listed again. Just looks like shenanigans behind the scene.
behind the scenes and buyers can, especially in a buyer’s market like this in most parts of the country, yeah, they can start to smell blood and like, okay, what either, you what’s going on? I’m going to stay away from this or like, oh wow, there might be some, you know, deeper motivation for whoever owns this property actually move this thing. And then they can come in a bit lower. So you got to put yourself in that buyer’s psychology when you’re trying to make moves like this. And even
Disregarding that, the fact that it’s buying at 46 and they had a buyer at 80, not quite a double, and that one dropped out. Again, I don’t know what was the days on market, how much it was listed for prior. I still would not feel comfortable again, just anywhere in the country in this current macro to buy anything that is below a 2X conservative gross margin. So we wouldn’t have done that anyway.
again, this just really kind of indicates how nasty you can get into a, or, you know, how you can get into a rather nasty position really quickly here, because if you’re under real desperation to move a property and that that’s what my thinking was, okay, we have a, I’m, I’m kind of guessing here, but I’m estimating this was the play.
Um, is that, okay, we have this shorter option contract with the seller. Uh, we’re to list it to really move quickly so we can, you know, we, have to get out of this thing quicker or we’re going to lose the contract. not going to be able to complete. Um, you already put all this time and effort, you know, the marketing dollars, what have you. Uh, but okay. If things fall back either, okay, we’re going to lose the deal entirely. And now your negotiation.
chances to work with the seller, already going to be really irritated. If, if, if you come back and either ask for an extension, or ask for price drops, because if you’re trying to get funding and probably going to be like, you know, folks like myself, like now that there’s, there’s no way we would close equity on this given the situation and now the black mark on the deal. And you didn’t even have a more than two X, offer on the table in the first place. And now you’re telling me again, my.
speculation here, but this is what seemed to be implied is like, okay, we’ll secure the asset and now we’re actually going to list higher because, you know, it’ll be fully under title and there’s not as much of a timeline associated with it. So that’s always like the misalignment from risk because it’s like, okay, we’ll get somebody else to fund the deal and still be able to potentially get the upside, but feeling less pressure from the timing. Whereas me as the funder, like, yeah, I’m definitely going to be feeling.
pressure day one. I always want to get things to move ASAP and I’m already fighting a black marked listing that might have already been listed for below what you were suggesting to now list it at. So just not a good situation. So I presented all this back on the rationale behind what we thought about it. Yeah, there again, it was like a fairly interesting property just from raw characteristics, waterfront, like, you know, there, and there were
buyers and some activity in the area or other sold comps to work off of. Where I don’t think selling at 80 was unrealistic. think that was even below market. But, you know, again, there’s not really guarantees. There wasn’t anything like immediately moving. There was another sold comp that took three years to move at a much higher premium price. You had to account for that days on market. And it was overall more superior asset. So, you know, you got to be.
careful with that. So all of this to say, you know, trying to set up these option contracts, I get it. It’s more of a de-risked plan, but you got to be really careful about how you strategize doing this. And if you got to buy yourself as much time as possible, and if you don’t, and you get stuck in a situation like this, like things can unravel just so quickly and to expect other funders.
I mean, maybe you can find dumber money all around or maybe other funders who are willing to take that risk. But me looking at this, it’s just red flag after red flag after red flag coming to me with three business days to close on an asset. When you already put a bunch of hair on the deal yourself, you caused that hair on the deal, which is just going to make it more unattractive.
Anyways, you just have to really like before you put something on market, you got to be really, really certain that you’re approaching it with the best strategy and tactics in mind and have some plan B’s and plan C’s coming up. And you might not always have, you know, plan all the way down to MNOP. Sorry, forgetting my alphabet. Jumping in the jumping in the middle there.
But you got to have something in mind because just a pure desperation sprain, find a finer, close this deal and save it. it, just, it looks really bad. Uh, and, most people are not going to come save the day for you. Uh, especially again, with the hair created on the deal, the numbers aren’t great anyway. And then you’re kind of screwed. The seller is going to be pissed and backing off, probably lose the contract. And then you’re, you’re back at square one and not making any money. In fact, it’s a net loss because of all the marketing dollars.
and time spent and opportunity cost on that deal in the first place. So lesson here, be careful with how you set up deals. Again, see these all the time, double close situations, markets more competitive now, you’re for, you’re trying to compete on less margin, less money out the door, but just know that you’ll set yourself up for other risks.
on the backend when things don’t turn out in your favor. So hopefully this is helpful. SeriousLand.Capital for any of your funding needs and Land Daily Diligence Facebook groups, zero cost review of your land deals and then LandPricer.ai for most simple and accurate way to price land. I’ve got a ton more deep work on that done. Some of the most difficult prompts for the software we’re done today. Just got to keep grinding through it.
That’s what it takes to build a great product. And I feel like we are heading there. Subscribe and share. and yeah, Unconference, use my last name, Duff, for $200 off your ticket, landunconference.com. You know the drill. Take care, see you tomorrow. Bye.
