Marketing Bank Owned land for sale requires specialized techniques.  The best method for marketing land successfully depends on two factors: the type of land and its location. Since land does not have a specific use, we have to rely on what is physically possible, legally allowable, financial feasible and probable when evaluating potential uses. For instance an office building tends to stay an office building, but a tract of land might be used for an office building, a retail center, apartments, a hotel, you get the idea. When marketing land, some skill and experience is required on the part of the owner and the marketing professional to both accurately predict the highest and best use and target the types of buyers that might value that use. I group land into five categories:

1. Individual Residential Lots
2. Developed Subdivisions
3. Recreational Land (having no immediate economic use unless returned to cultivation or timber harvesting operations — currently large tract entitled residential property falls into this category
4. Commercial/Industrial Lots (sometimes called pad sites)
5. Large Tract Commercial/Industrial Land

There are four types of buyers that are involved in the land market at various times depending on availability of credit and land prices. They are speculators, end users, builders and developers. The distinction between builders and developers usually can be easily made by thinking of developers as making horizontal improvements, and builders making vertical (on top of the land) improvements. Below is a table of the types of land each buyer might be acquiring depending on market conditions. Later on, I’ll list the buyer types that are actually buying each land category.

Once we have correctly ascertained the highest and best use for the land given the four considerations listed above, we must then gauge the market to see what type of buyers are actively acquiring each type of land. Below is the table showing the types of buyers actively in the current market for each land type:

 It’s fairly easy to see that builders and developers are completely out of all land acquisition activities right now. I know you’ll hear stories about so and so builder buying some lots are such and such developer starting a new subdivision. These anecdotes do not account for enough activity to make a dent in the available land inventory. In fact, the only reason they are noted at all is because many are looking for signs of recovery and more importantly because the volume of land sales is so amazing low that every single transaction is a story in and of itself. In order to move large quantities of land right now, you must look first to the end user and the speculator. The end user is in the market primarily because some financing is still available for owner occupied assets. Since an end user builds a dwelling or business that is immediately put into use, some banks will provide acquisition and construction financing.

Now that we understand that the end-users and the speculators are the only two buyers in the market, we must further segment the market into good and bad. Basically anywhere north of I-20 and between I-75 and I-85 up to GA Hwy 20 is good and everything else is bad with a few notable exceptions. In the bad markets, the only buyers for all five land types are speculators.

Where end user demand is still present, traditional property listings are still successful as our lists circulated by REO divisions in banks to brokers and qualified investors and users. Where only speculator demand exists, some trick must be employed to introduce a sense of urgency on the part of speculators. Left to their own devices, they will continue to sit on the fence and the land prices will continue to decline and the spiral will head downward as it has for the past 2.5 years. The tricks we have used in these bad markets include: sealed bid events, reserve auctions, absolute auctions, and pooled sales. Let me define these terms in some detail:

Pooled Sales: The benefit is two-fold. Speculators are enticed by opportunity for a discount by purchasing in bulk and shoppers of individual properties are forced to action by the prospect of losing the deal because they would be unable to bid on the asset when it is offered in a large pool.

Sealed Bid Events: No obligation on the part of the seller to disclose the bids and much effort must be made to convince the buyers that the properties will actually sell in order to obtain bids.

Reserve Auctions: These tend to create some excitement around an otherwise unattractive asset and qualified or cash offers are almost a certainty. As with sealed bid events, the buyers must be assured that the property has a high likelihood of selling in order to obtain bids since the owner may refuse all bids if the reserve is not met.

Absolute Auctions: Real excitement is created for the prospect of an amazing deal. This is sometimes the only way to draw speculators off the fence in very poor markets.

Absolute Non-Qualifying Owner Financed Auctions: We haven’t seen these yet, but I expect they’re coming in 2011.

It is important to note that there are several types of auctions including online, odds & ends and parcel subdivision sales. There are also several bid methods including pick and choose by the acre or lot, minimum increases or not to recombine parcels or lots, buyer premium fees added to bids, and others. The rules of the auction can be just as important as the format when trying to maximize property selling prices. Each auction company prefers or is competent under certain conditions.

Below is a matrix showing the five land types and the best marketing method to obtain a market sale in 6-12 months.

When hiring a land broker, like an auction company, it’s important to find one with experience in the specific land type and geographic area. The best strategy to market bank owned land for sale utilizes a number of different marketing methods and vendors to obtain successful sales at the best prices available in the current market.