This episode dissects the mechanics of why purchasing active MLS listings without value-add strategies produces systematic failures. The analysis demonstrates how days-on-market accumulation creates permanent stigma, how seasonality excuses mask pricing problems, and why 15-20 cents on the dollar becomes the minimum viable entry point for non-value-add acquisitions of listed properties.
Key Takeaways:
- Active Listings Require 80-85% Discounts for Pure Arbitrage Properties stalled at current pricing need 15-20 cents on the dollar acquisition costs to overcome market fatigue and generate acceptable margins without forced appreciation.
- Days on Market Transfer as Permanent Black Marks Even after ownership changes and listing resets, savvy buyers and their agents detect previous listing history, creating suspicion that collapses offer quality and timeline.
- Only Force Appreciation or Walk Away Minor subdivides, utility installations, or clearing work justify active listing purchases, while improved marketing or seasonal timing alone cannot overcome the stigma of failed initial listings.
Tune in for the full framework on when active listings become viable and how to structure extreme discounts that account for inherited market damage.
(Podcast transcript below)
Hi, Chris Duff over at Serious Land Capital, vacant land funding partner. So today I wanted to cover another topic that routinely comes up on our land daily diligence, Facebook reviews, or even outside of that, folks will send us various funding deals for, you know, just active review. And the issue.
that we occasionally see is that when a property is active, that makes it potentially far more difficult to consider funding that property just because, well, a number of reasons. We’ll consider active properties more if there’s value add opportunities.
And that’s generally known within the industry. You can especially buy a much larger parcel and either force appreciation from doing a minor subdivide or maybe even a major subdivision depending on the particular property. Those will be the most typical ways to force appreciation. Maybe you do some additional value add with some light or heavy improvements such as
clearing or utility installations, driveway culvert additions, fencing, et cetera. There’s a number of ways you can improve that will potentially make the property more appealing in the eyes of your end buyer and be able to boost the total exit price per acre compared to
what you might purchase the property as, even if it is an active listing. That’s really the only scenario that really makes sense. And we speak from experience here. If you buy an active listing and just think, I can just undercut a bit of the price that, or the current price at the moment.
Or maybe I can improve the marketing. Those are really your only two avenues for, you know, potentially betting on a successful sale of the property. The issue is, you know, if something’s being listed and you’re working with the seller to have them potentially take an even lower ball offer price, you know, say they’re, they’re willing to accept half.
the price of what the property is currently listed at, then that should be very telling that they’re not really getting any offers or even lowball ones with the property being on market. And this becomes even more apparent for properties that have been on market for north of 60, 90 days. Honestly, I’d be even more concerned if something’s been on for even two to three weeks.
and it hasn’t gone under contract like immediately, you’re already running a risk of some market fatigue or just being a bit overpriced on average. So you have to be extremely conservative when considering buying an active listing. And so let’s say that, okay, yeah, you have this motivated seller, they really want to move on.
Even if you estimate what the undercut price is for that property and say, okay, you know, it’s not moving at the current price, but maybe, you know, 20, 25 % below might be possible. And still for whatever reason you get the salary to be even 50 % of that reduced undercut price for the active listing, you’re going to be dealing with a black mark on the property just by having it.
accrue more days on market. So even if you shift the listing and restart the days on market, most properties, it depends what area of the country, but most properties, there’s going to be some tag on it in terms of viewers of that listing being able to tell that, this property was previously listed very recently.
whether they can see that previous list price or not is dependent on the jurisdiction. And whether the days on market would just continue from.
The time that it was listed up until the time you buy it usually it’s going to be reset because you know Possibly you might work with the same broker that is listing the property. Maybe a different one But you know nevertheless most buy side brokers for you know an average savvier Buyers would be wondering okay. What’s going on here? You know this thing just sold now. It’s back on market for potentially even less That that’s going to be
Again a black mark negative mark on the property Because people start wondering okay, what’s wrong with this thing? Why? You know just sold now. It’s it’s on for even less potentially again We’re assuming we’re not doing any value at anything like that. Maybe you improve marketing photos You know sometimes I can help but you know not Not always here So that’s just something to
uh, keep in mind, um, uh, regarding this. Uh, additionally, you know, there’s, there’s a chance that, okay, and we’ve run into this issue before is that, okay, you know, some of these times, these, properties are going to have a bit more seasonality associated with them. Um, and, uh, uh,
we’ve bought an active listing where it’s like, okay, you know, this was listed too early, but you can try buying it. And for sure buyers are going to be coming in later on, but just no one’s buying it right now. And we ended up buying that property, but it, the price ultimately was still the primary driver. And then that’s, that’s the point I was trying to get back to. Okay. You could, you could change some of the marketing photos. Maybe the seasonality comes into play, but ultimately that price and days on market.
are going to be the primary drivers for true value and marketability of particular properties. the longer it sits, regardless of seasonality, regardless of your marketing efforts toward it, you’re just going to be fighting a losing battle along a very slippery slope for trying to retain that value.
for an active property that you’re purchasing. Again, even if you undercut or you accept some explanation or rationale that there’s some seasonality involved with the property there, be very, very cautious is kind of the name of the game here. generally, we wouldn’t suggest buying those active.
properties again unless there’s a real value-add opportunity or you could just Or or you know, it was listed for probably sub one month poorly marketed You can get some insight from the actual realtor listing the property. I know some are a bit cagey about that, you know Representing
possible buyer as well as the current seller, but then you might be looking to relist with them. mean, there’s no laws against that. Some realtors will feel more comfortable or not than others. But we have pursued that pathway in the past. I was working through motivated sellers in order to buy an on-market property and then we were going to value add it. It still took way too long. That’s another story for another time.
Um, uh, but that, was a strategy that, that we did follow there, but, know, bottom line, if you really don’t have a value add opportunity, it hasn’t been listed that long. I would try to undercut even more on your buy price than you would think. I mean, you, you’d have to be getting like close to 15 to 20 cents on the dollar, um, for potential current list price, even if it’s getting real activity there.
Just because again, you’re going to be fighting market fatigue, black mark on the property, multiple sellers within a shorter period of time. All of those are going to affect the marketability of the property, especially in a buyer’s market that we’re currently in where you really have to stand out. So hopefully that helps.
in your journey of land investing here and anytime you submit a property that’s like if it’s active, just let us know right away that that’s always going to be the most critical data point. I don’t care about any of the other comps in comparison to the actual property itself that is by far the best data point than anything else that could be provided. So just have to be upfront and transparent about that.
But yeah, hopefully that helps on that topic, which I’m sure we’ll return to here and again, because it’s so common. Want any funding? Check out seriousland.capital. Otherwise submit requests for deal reviews at LAND Daily Diligence Facebook group, and then check out lambpricer.ai for the most simple and accurate way to price land. With that, take care everybody. Bye.
