Truthing "for sale" data
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I'm looking at a few counties that don't have redfin data and happen to be in a non-disclosure state, thus the only price data I have to go on is "for sale" as opposed to "sold" data. A lot of listings show pretty significant price cuts, upwards of 20-50% at a time. Once you've compiled the average price/acre for a county like this, do you knock it down by some percentage to get to a more realistic guess at market value? I was thinking if most land investors are buying for 10-30% of MV then most listings probably end up selling for 50-60% of MV even if they're listed at 100% (or more!)?
I know it's not an exact sciences, just wondering if there's a rule of thumb?
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Max Householder coming up with an average price/acre for an entire county isn't going to be the most accurate set of assumptions, because properties on one end of the county can be worth very different amounts than on the other end, not to mention all the other variations that will come into play with differences in property features, location, availability of roads and utilities, etc. Some people will try to get more granular and price them by zip code or subdivision. As you can imagine, it takes a bit more time to do it that way, but it will also result in more acceptances because your offers are more on-point.
Anyway, you're on the right track in terms of applying a discount to the average listing prices. The "right" discount to apply can vary a lot depending on the market, but I've seen 20% used in a lot of scenarios. In other words, if you find that all 5-acre properties are listed at $20,000, then you would just assume that the actual selling prices of these will be $16,000, and then start pricing your offers at 10% - 30% of that number.
Obviously, this is a very over-simplified illustration, but hopefully, that gives you an idea.
If you haven't seen it yet, you might want to check out Price Boss (see this blog post and video, which explains how it works). It can be pretty helpful in assisting with exactly what you're trying to do here. It works pretty well if you're grabbing comps from websites like Zillow or LandWatch.
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Seth Williams Thanks Seth, that's good to know. Once I get some bites I will dial down to specific zip codes and re-price for offers and sales.
My question came about while trying to get to an average price per acre by county in order to determine whether the counties on my list would be too expensive to work in based on my budget and "position sizing" i.e. I don't want to have to put all my eggs in one basket over and over again. It was a good exercise and I managed to narrow down to my first small group of counties to mail. I'm glad I took the time to do it as most of the counties in my state that screened best by Jaren's 6-category screen using FED and Best Places data were way too expensive for me, which makes sense since logically they'd be the most desirable. I managed to find a happy medium though that tick a lot of the job/pop/employment boxes but are also reasonably priced and relatively active markets. Another issue I found is that a lot of counties with very cheap land, the average parcel size being sold is MUCH higher, so even if the $/ac is $2-3,000, the average parcel size might be 15-30 ac. vs. 5-6 so the total market value trends toward $50-100k, which is great if I can get it for 10%, but can also put a lot of properties out of reach.
If you're interested I'll send you my sheet. I added a standard deviation formula to quickly cull the outlier properties and narrow down to a reasonable county-wide average, assuming there was enough data. I set it up so I can download the Redfin sheet, delete 3 columns, calc sqft to acres, copy, paste and it populates the averages and everything. I was able to bang through a few dozen counties in a couple hours.
