Top 5 Land Brokerage Transaction Types
Though it may not seem so at first glance, land brokerage is a complex and multi-faceted niche in the business of real estate. Unlike most improved property, land value analysis is complicated by the multitude of uses to which a given tract might be put.
The land broker must also be very knowledgeable about local land ordinances, zoning, and environmental issues. Land brokerage is a highly specialized niche in the real estate business.
In this article, we describe the top 5 types of raw land transactions and how they are similar and different. We hope that some land always stays in its raw state, as there are many beautiful areas on this planet. However, there are many great ways to develop land and make it useful for humans and our economy. We'll talk about some of those here.
Farms and Ranches
The real estate agent or broker dealing in farm and ranch brokerage would need to develop a unique skill set. Valuation and marketing of farms and ranches are vastly different than any other type of real estate.
From crop rotation and weather cycles to over-grazing and water rights, there are a number of extremely important factors that determine the value of this type of property. Knowing local zoning and regulations for determining conversion uses would also be quite important.
In recent years, the EPA and environmental regulations have come into play in a big way. Some farms and ranches that have maintained fueling stations for their tractors and vehicles must be carefully evaluated before purchase to see if any remedial action must be taken before purchase.
Undeveloped Tracts of Land
Large tracts of undeveloped land, particularly those getting close to the borders of fast-growing urban areas, represent a significant portion of land transfer transactions. Whether on the Buyer or Seller side of this type of transaction, a broad knowledge base in local business trends, employment, urban growth patterns, land use regulations, and development costs would be critical.
The ability to negotiate in the corporate environment would be important also. There are highly paid positions in land acquisition in many corporations.
Some areas, such as in the Southwest, offer opportunities to buy whole sections of land, though it's probably never going to be developed. Some of this is purchased for hunting clubs.
Land in Transition or Early Development Stages
From closed military bases to tracts set aside for specific development purposes, again we find a need for specialized knowledge and skill sets on the part of the land broker. In many of these cases, the purpose or generally allowed purpose(s) of the tract are already decided.
Knowledge in the economic viability of the approved uses and the costs of development would be required. Governmental and tax incentives play a role here also. The successful broker will have knowledge in these areas.
Some investment partnerships buy these parcels and use their pooled resources to develop the land. It's risky business, but can be quite profitable.
Subdivision and Lot Wholesaling
Many developers prefer to purchase an undeveloped tract, get the approvals, subdivide it and install utilities, roads, and other infrastructure. They then use a land broker to wholesale the lots to builders for construction of homes and other facilities.
A planned community concept might allow not only homes but limited shopping facilities and some hospital or other institutional uses. This land broker would need commercial and residential expertise as well as be able to market to builders.
Site Location and Assembling Parcels
This highly specialized niche would require the land broker to locate parcels for a specific buyer or purpose. Many times this requires negotiations with various owners to acquire enough adjacent land for the proposed project or development. An example would be a major retail chain using a land broker to acquire land from multiple sources on which to place a new store location.