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LandandFarm.com is the leading website for rural and acreage land listings as measeured by Alexa and Compete traffic.  In the last couple of weeks, they have changed their pricing dramatically to allow property sellers and brokers unlimited advertising for a $49.95/month.  This price is lower than the $75/month they charged for just 10 listing ads under the previous pricing scheme.

The website has a network of other sites like eLandUSA.com and a monthly classified add magazine that features many of the properties on the website.  LandandFarm.com was purchased last year by Loopnet.com.  I have been waiting for some changes to the site or business model since the purchase, but this new pricing structure is the first big move so far.

The previous pricing model charged for single ads, packages of 10, 30, and custom amounts. The other big three land listing websites (LandWatch.com, LandsofAmerica.com, and LandFlip.com) all charged a monthly fee for unlimited listings.  The advantage to LandandFarms.com’s previous pricing strategy was that better properties appeared on the website and usually only active listings were on the site.  The other three did not charge more for more listings, so their sites usually have a larger selection of properties but not necessarily more of the quality listings.  There is also no incentive for the broker to remove expired or sold listings under an unlimited pricing plan.

I anticipate the change was made at LandandFarm to convince long time advertisers to stay on board despite a terrible land market.  It will be interesting to see if Loopnet.com adopts a similar strategy for their premium listings service for commercial listings in the face of a terrible commercial real estate market.  Currently Loopnet’s premium listings are priced based on the number of premium listings a broker has on the site.

Ask any land appraiser in town and you’ll hear the same story.  Land sales comparables are virtually non-existent over the past 18 months.  That is starting to change based on my personal appointment book for Closings and word of mouth from other brokers about deals that are pending sale in the near future.

Now that we are seeing actual sales hit the books, the million dollar question is, “Will the banks cut their list prices?”  The answer is probably, “Yes, but not by very much.”  The reason for this has to do with the vagaries of the accounting practices banks are required to follow.

Banks tend to hold asking prices at levels equal to their book value for their assets.  If a bank were to wholesale reduce prices on their assets, they would inevitably be required to reduce the book value on those same assets and tally a paper loss without actually receiving the benefits of a sale: namely cash.

Land buyers are undergoing a re-education process not seen since the FTC days some 20 years ago.  The emerging consensus is that list prices are not going much lower, but the deals will got to those willing to make offers — and lots of them.

Land and lots are a specialized subset of real estate requiring a great deal of upfront time and expense in order to understand each property before crafting an offer.  Many are unwilling to put in this time and effort unless they are fairly certain the asset may be acquired on the cheap – buyers have largely relied on published list prices as the main indicator of a seller’s motivation to sell at or below current market prices.  Since those list prices have remained high, we haven’t seen many shoppers.

The rise of sealed bid sales of late is a strong indicator that banks are willing to deal at market prices.  These events allow banks the luxury of leaving published list prices high while encouraging buyers (with a wink and a nod) to submit lower than asking price bids for serious consideration.  The downside for buyers is there’s still no guarantee the property will sell even if a large number of bidders participate.

The option of last resort for banks will be absolute auctions where the property is sold regardless of price.  I like to call this the “nuclear option.”  So far, most banks have been unwilling to resort to this extreme option because of the lack of control over price on their part.  When you start to see a large number of absolute land auctions (and better yet ones with non-qualifying owner financing), you’ll know the land market has hit rock bottom.

However sealed bid events are bringing more land buyers back into the market and if the technique starts to yield sales activity, we may never get to the “nuclear option.”  If you are serious about investing in land while prices are at record lows, you would be well served to start submitting bids on sealed bid events before this opportunity passes.  Click here to register for specific land and lot offerings in the FDIC sealed bid event that closes May 12, 2010.

Loopnet News reported today on the Moody’s/Real Commercial Property Price Indices and I found some reason to be encouraged.  Values for Commercial Buildings (warhouses, offices, retail and apartments) were up in January for the 3rd month in a row and the December values spiked 4% over November — the largest month-to-month spike in the indices’ history.  This is good news compared to the trend we’ve been in

Despite gains in recent months, January pricing for the all-property index was still down 38.7% from January 2008 and 40.2% lower than its peak in October 2007.

Industrial properties led all sectors in price drops over the past two years, as pricing for all of 2009 was down 33.9% from 2007. Multifamily was down 31.2%, office 30.6% and retail 25.9%.

The bad news is that transaction volume is light and the authors of the report feel that until banks and the FDIC start unloading troubled assets en masse, we won’t see a new pricing paradigm take hold.  Up until now, lenders have been willing to restructure and extend debt rather than foreclose.  We saw this same strategy in the land sector in 2008 and 2009 — only now does the faucet appear to be opening for a high volume of sales in distressed land assets.  Watch the WSJ and Atlanta Business Chronicle for a major sealed bid land sale to be held by the FDIC in the coming weeks.

According to the recently released CBRE Capital Markets Cap Rate Survey, transaction dollar volume for 2009 in all commercial categories (office, industrial, retail, multifamily, and hotel) fell 90% from it’s peak in 2007.  Furthermore, the report quotes Real Capital Analytics finding that values droped 40% during 2009 alone.

Here’s a snippet from the report:

According to Real Capital Analytics (RCA), values experienced a decline of nearly 40% over the 12-month span. US investment activity dropped 63% from $146 billion in 2008 to $52 billion in 2009, and down 90% from the 2007 peak of $522 billion. CB Richard Ellis Econometric Advisors (CBRE-EA) forecasts total returns will remain negative, getting “less bad” in 2010 before turning positive in 2011. Investment volumes are expected to increase in 2010, but remain below the peak levels of 2005 to 2007.