This episode dissects the growing trend of double close transactions in land investing and why actively listed properties represent particularly dangerous territory for equity funding requests. The analysis reveals how innovation contracts running out of time combined with market-tested pricing creates a perfect storm where funders face compressed margins, uncertain exit timelines, and reputation damage from relisting properties that buyers have already passed on.
Key Takeaways:
- Active listings represent the most important underwriting data point Once a property has been market-tested for more than a few days without offers, comparable sales become nearly irrelevant because the active listing itself reveals true buyer demand and appropriate pricing better than any analysis.
- Double close time crunches force suboptimal funding decisions Sellers closing early or innovation contracts expiring creates pressure to seek equity funding in situations where margins are already compressed below the 60% of conservative market value threshold funders require for adequate downside protection.
- Relisting properties creates massive negative perception Taking a property off market and immediately relisting it, even with the same broker, signals problems to buyers who already saw and passed on the listing, requiring further price cuts to overcome the reputation damage.
Listen to the full episode for specific guidance on innovation contract timelines and why 180-day terms provide essential buffer against market uncertainty.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital Vacant Land Funding Partner. So today I wanted to discuss a bit more about possibly acquiring active deals, particularly as it relates to existing double close situations. So I just had commented a bit about this in the last
land daily diligence session, but because it shows up so commonly, I just wanted to elaborate a bit further here. know, double closes have become more popular across the land industry. You know, things get more competitive. Sellers want more money for their deals. Deals get bid up more routinely. So,
We’re well aware that a lot of land investors have shifted, okay, I offer more, try to get innovation contracts going, see if you can double close accordingly. I mean, it’s a fine strategy as long as you can make it work. And we’ve handled a lot of transactional funding associated with these deals as well. You can get it stuck in between a rock and a hard place though, when the seller
decides they might want to close earlier than expected, or you start running out of time on your innovation contract. reputation is always a risk here. You’re trying to price properties properly to still get the seller what they’re looking for and still earn your nut on top of those proceeds that are going to be distributed.
but yeah, when, when you run into those situations where, yeah, you’re, you’re running out of time, not able to get a seller in line. And again, you’ve got potential closing timelines that need to be accounted for, outside of what might be on your innovation contract. So, you know, even if you do get
potential backup funding or you find a way to close a deal, you know, that’s going to take some time to potentially close with the title company anyway. It’s possible you might’ve done some work on it initially. Usually that would be the recommended case just to ensure you’re not trying to sell anything that hasn’t been vetted appropriately. But again, you can risk trying to.
sort that out just on a B2C buyer case and sort out the title there. But again, it depends how much risk you might be willing to take before putting a property on market. So that’s just something to keep in mind in relation to whatever closing date you have set with your seller. So it’s not like you can just immediately turn around and close on a property.
Um, when you have a date coming up, so, uh, that’s why, you know, I know a lot of folks will recommend on those innovation contracts. Um, you know, giving yourself close to, you know, 180 days generally. Um, usually I see 90 days to be the least amount, but I’ve definitely seen less because again, we’ve gotten a lot of these. Crunches that have come our way, uh, more routinely over the past several months. So.
Let’s jump into that scenario then where, okay, you’re running out of time or seller just is getting cagey. They want to get out of the deal earlier than the date and you’re losing rapport by the day, starting to feel the pressure. And then investors will come to us, okay, can you equity fund this deal? We think that it’s going to sell for X amount. It’s already listed, getting a lot of activity, et cetera.
Here’s what the margin is, what we need to pay out to the seller. Can we move on this? Every situation is different, of course, but more often than not, I’m extremely hesitant to jump into those situations with a lot of overlapping reasons, like when I had discussed the other day about just buying.
actively listed properties, but active on behalf of the seller, not when you’re trying to double close on a property. if a property was listed within the last five days, perhaps, and was already getting a lot of activity, I might be more inclined to consider, okay, this is realistic that we could exit for whatever this price, track at the margin.
based on what the proceeds need to go back to the seller and we can see what we have to work with there. But again, it’s always cautious because equity funders, we come in, generally would wanna be buying no more than 60 % of conservative market value price depending on the market. Probably the higher value of the deal, the more conservative I’m gonna be. And if you have a double close set up, usually your margin’s going to be more.
constrained than that, otherwise it might’ve made sense to just purchase the property outright. So already we’re probably gonna be in a tighter margin situation anyway, even if you have a lot of activity on your deal. So I’ve seen some investors come back and they might say, we’re gonna be able to sell this for X amount.
to Y amount range, but they’re only listing the property at that X amount, the lower amount. So if I’m seeing something like that, well, I’m not going to assume that we can sell it for more than that. Otherwise it probably would have moved right away. Like again, quality properties, they will move quickly. Price is the primary determinant on marketability.
Even if we could have improved your marketing and so forth, photos, listing, description, et cetera, better quality broker. I’d say all of those factors are probably worth, you know, maybe 5 % of the potential marketability of a deal. Like price really drives almost everything. And, you know, price combined with characteristics, but that, that should always go into what your initial pricing analysis was.
when you first put the property on the market. So, you know, barring some activity within the first few days of, uh, know, listing a property and you’re already in a crunch. Um, but you know, if something’s already been listed for more than a week, two weeks, close to a month, and it might have a lot of online activity, maybe a lot of window shopping, but the next question I’m going to ask, okay, have you gotten any site visits, any offers, even any low ball offers?
Like, we know what a real floor is for this property? Could we exit this thing now? By the time a property is listed, and I know I remark on this constantly, like the active listing is by far the most important data point. We can comp out the area plenty of times, but if something’s active, that is going to be driving most of our…
underwriting decision-making when it comes to that particular property. Like most of the times I see active listings, I’m really not even considering other properties in the area because I can make a lot of decision-making just based on what the activity is for an existing active listing. So usually I’m gonna wanna undercut that again outside of…
a situation where it was like just freshly listed and might’ve already gotten some calls. Like if it’s gotten some offers and so forth, then great, we might be able to make some decisions off that. yeah, if it’s already been, you know, two weeks plus on no site or, you know, site visits can be somewhat important, but no offers by then. you know, the more days on market, the harder this property is going to be to sell and less likely at that price.
that that it’s that it’s currently listed. So we want to undercut accordingly from that. And again, might already be constrained on margin anyway with the seller. So we might even need to try and negotiate to get them to take it down. But that’s going to be in a rare case for them to accept because you had already promised them a certain number with the novation. Then it got tight and they’re probably not going to be the happiest.
especially if you ask them, to reduce the price right at the last minute, that rarely works. You got to be really cautious before getting into these situations, but things happen and try to save things when you can. But I’m just remarking from an equity funding perspective, why it’s so uncommon that we’ll pursue these. And as a last point here, recall too, is that even if we buy the property,
And even if we utilize the same broker, that property needs to be taken off market and then relisted anyway. So that’s a massive black mark on the property on behalf of other buyers who, you know, if it’s been up for longer than a couple of days or so, lot of prospective buyers already have seen it and they see, wow, this property was just purchased.
And now trying to be on sale again, what, what just happened? think there’s something wrong with it. Buyer just got cold feet immediately, maybe for the same pricing slightly below. Um, you know, just put yourself in, these buyer shoes and, and, uh, realize that you, you, you, you’ve got a lot of hair that you suddenly just put on this property. That’s going to have to be overcome and why we’d probably want to undercut even further on that buy price to account for the negative impact.
of the marketability when we’re buying active listings. So word to the wise, extreme, extreme caution when it comes to purchasing active properties or trying to seek funding and saving a double close situation with equity funding or even debt funding, high risk scenario, hard to make work.
Hope this helps. SeriousLand.Capital for any of your funding requirements for various deals. Tons of activity this week. A few fires to put out, of course. Title companies, more stories about that. Share shortly. LandDailyDiligence for zero cost review of your land deals and LandPricer.ai for most simple and accurate way to price land. With that, take care everybody. Bye.
