This episode exposes critical risks in using off-market sold comps for land valuation, particularly when MLS data shows sales without listing descriptions or days-on-market metrics. A Tennessee minor subdivide analysis revealed that off-market comps purchased by marketing firms at inflated prices ($55K/acre) significantly exceeded on-market comparables (half that price), demonstrating how specialized buyer networks create unreliable valuation benchmarks.
Key Takeaways:
- Arms-Length Uncertainty Off-market deals lack transparency on buyer-seller relationships, potentially reflecting family discounts, estate transfers, or sweetheart deals rather than true market value.
- Marketing Firm Premium Properties sold through sophisticated out-of-state investor marketing campaigns command above-market prices inaccessible without direct partnership with those firms.
- No Days-on-Market Data Off-market comps hide critical velocity metrics, making it impossible to gauge how quickly properties actually moved or how many buyers passed before closing.
- National Builder Distortion DR Horton and other builders use land banking structures with predetermined returns (10-20%) that don’t reflect open market pricing, especially in multi-parcel purchases.
Listen to learn how to identify off-market comp traps and when these sales actually provide reliable valuation data.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. Today I wanted to go over issues with off market land deals. Again, I know I commented a bit on this topic earlier in the week here, but had some additional insight to share.
You know, when, you’re reviewing sold comps on MLS dependent on the area, usually it’ll be a minority or just completely non-existent. Sometimes it’ll actually be the majority is where you’ll come across, sold comps that have no listing description, or maybe it just says for, you know, Comp purposes only. And then you look in the.
pricing history and it just shows the actual sold date indicating, know, it was entered into the official records. But what was not actually on market and it’s a little difficult to figure out, you know, why some of those are even included on like the Publix, Illo or Redfin record bases. Some counties may actually just
you know, submit that data automatically to the listing services. It’s a little unclear to me why some areas seem to be more common doing this than others. It’s just probably another lesson that land is an extremely fragmented industry. Even I’m a, you know, county by county level, let alone across the country. But the problem with using off market data is
You know, myriad. So, you know, if, if, you have like one or two properties in, you know, mixing in with like maybe 10 other sold comps that are similar in terms of characteristics and location relative to the subject property, you know, maybe it’s not as big of a deal, but if you start using several of them or they’re informing the majority of your comps,
it gets a lot trickier in terms of the reliability of that information. And to start giving you some examples, first, we don’t know whether that off-market deal was actually arm’s length. So that’s always something that you could check.
you know, either on land ID, typically, if it’ll show like who was the previous seller, or you can check the official records, property appraiser website on the county. but you know, even then you can be misled because, you know, if it’s not an arms length transaction, basically that means like, okay, the, the buyer and the seller were not related or, or wait, did I say
Yeah, not an arms length transaction, meaning they were a family or like a close family friend, for instance. it wasn’t, know, arms length means that, uh, you know, you, you, don’t know who that other person was that was coming, or maybe they were represented by somebody. Maybe the brokers knew each other if they were involved. Um, or maybe, uh, know, even if it was an off market deal, uh,
You know, it was listed on some non MLS platform, but the buyer came in and, you know, finding it online or maybe from a neighbor letter or what have you. I don’t know. It could be a whole bunch of different avenues that a buyer came in. but if it’s just a family member or a family friend, usually they’re going to get cut a better deal, on, on the sale. so that number that you’re looking at.
could be putting downward pressure on the overall price per acre in the area because it’s not a realistic sale. Like it wasn’t exposed to the actual market because the buyer just got a sweetheart deal from having some relationship with the seller. And so sometimes you can just tell, within to be a non-arms length transaction.
You know, one could just be like the seller was selling it to themselves, like moving it into a trust account or some type of a state planning situation. We’ve seen that plenty of times. you know, it’s same last name just transferred to somebody else within the family, some airship situation again, could be more estate planning. But again, because family members don’t always share the same last name, you can’t always be 100 % certain that.
just because you see that meaning means that it’s not, arms length. So you have to be cautious there, or again, it could be like a family friend just getting, getting a good deal there. So that’s a definitely a common situation with off market deals. and then, you know, some areas it’s just more common to have things sell off market. Like there could be, you know, really tight knit.
brokerage groups that manage like a large local buyers list that, you know, even before things are planning to hit the market, they might be marketing out to hundreds of thousands of people. doesn’t, you know, something like that. And, you know, you might be getting, a discounted deal from somebody. Purchasing quicker than something’s actually going to hit the market, or maybe it is representative of the actual,
value of, of, know, a price per acre, market value within the area. And so then you really want to compare that back to, okay, on market listings, assuming there are any compare the characteristics, et cetera. Like I talk about a nauseam, make sure that it’s actually a realistic, number as well. but like, again, you don’t always know what
the circumstances of those sales are too. that’s the thing is usually you can glean some insight from the actual listing description. Like, you know, was a per test done or is there a survey or, you know, what have you, but, know, if you’re only able to go off the aerial imagery, you just, have no idea what actually went on behind the scenes or what type of terms were included within that particular off market deal.
Um, or maybe it was even like a deed of trust seller finance situation where technically there is a close from the official records, but you know, it’s possible it was like a higher number or, you know, not a realistic cash value, um, based on who was purchasing, uh, the property. Now that, that same thing could be said for, um, you know, listed properties as well is, you know, it could be some seller finance.
going on too. So again, you just had to be mindful on what those true numbers represent from a price break or perspective. It’s just listed properties. You’re to have a bit more insight on what actually happened. And who knows? Again, that off market deal, we don’t know how long it was being back channeled. Did it take months, maybe even years to actually sell? The seller just didn’t want to go through the whole listing.
process and they just kind of, you know, sat back back channeled for a while, different buyers lists and so forth. like, yeah, and could have different relationships with brokers locally. Could be all sorts of things. And so we can’t reasonably determine how hot the market actually was because we don’t know how long it took to sell the deal to it. So you’re missing all that days on market information, which we put a lot of stock into and,
you know, waiting how active the actual market is just by seeing how fast it moves. and then the other situation is, again, like more from a buyer’s list perspective and, to set the scene for this one, we were looking at this possible larger, minor subdivide, I think within Tennessee. and it was going to be like 30 some odd child parcels. I think it’s an aggressive move, especially in this market. And they were all similar acreage.
know, fairly beautiful area, some adverse selection, but, you know, lot of the comps that were being considered to set the value for the underlying child parcels were all off market deals. so everything on market was showing a price per acre significantly. I mean, almost half of what these off market deals were going for with like fairly similar characteristics.
And the thing was, is all these off-market deals, a number of them were either from like, you know, a deeper pocketed investor or two, or it was this marketing group that was marketing to out-of-state investors for like vacation land, what have you. And they had a really sophisticated mechanism for finding cash buyers out of state to come buy up these properties.
And so, to me looking at that, it’s like, okay, that’s solid. That’s telling me like, okay, there could be a market here, but if, if we don’t have a direct insight into who that marketing group is that’s marketing to all those cash buyers or having those deep pocketed investors that can buy a whole bunch, you know, chunk of child parcels, for above, above market price per acres.
That is a high high risk situation like I wouldn’t engage in that unless we could actually work with that marketing firm who was getting all of those results and so you can’t necessarily assume you’re gonna get those same results unless you you know have Direct utility are not direct utility but direct The direct ability to work with that agency or have those investor relationships
to get all those cash buyers to show up, even if your properties that you have are like similar or maybe even superior in characteristics. Like, cause if I’m looking at, if I need to put this on market, I’m not seeing any properties that are going for, you know, this high. So then all of a sudden you can have inflated values that are going to be more difficult to, to trust and say, same with that too. A lot of those sales were going on during that.
you know, mini bull market run from like late November, uh, post-election, uh, and pre-inauguration, um, that a lot of properties were being sold and those values aren’t really as justified here in April and May of 2025. So it’s like, yeah, I can’t really trust those numbers as much anyway, because it was just a different market then. So you have to account for all of that when considering some of these off market deals. So.
All of that to say it’s okay to consider them. It’s just, if you can find anything that has truly been listed, and is, you know, getting a fair look from the market, that’s always going to be your preferred data. and then if you really need to, and you can start to figure out, Hey, what’s going on with these off market deals and maybe realtors locally can indicate, Hey, here’s what the off market.
Um, deal set up looks like I know who bought this property and so forth through a whole bunch of buyers lists. Then you can start figuring out what’s more realistic to do. Um, but otherwise be very, very careful when considering using off market deals to inform your purchase price. And that, again, that’s just another thing too. If you’re using, you know, I there’s a whole bunch of like comping tools now that’ll just scrape data, find you a whole bunch of, of comps, but like, if they’re not differentiating,
off-market deals that are showing up on MLS or whatever. And I think that’s pretty difficult to do unless you’re taking like another look at it yourself and figuring out whatever the true days on market were and everything like that gets into a very risky game. So be careful from that perspective too. With that, Serious Land Capital for any of your funding needs, zero cost review of your land deals at Land Daily Diligence Facebook group and LandPricer.ai.
Subscribe and share. I’m late to my meeting with my developer for land Pricer. Got to hop off now. See you next time. Bye.
