- Commissioned sales people: People who are set up to be compensated based off of commission may “bend the truth” to get the sale. If they are also competing with other salesmen, they may also pressure you to make a hasty decision in order to sell the tract before another salesman does. Real Estate agents are required to disclose how much of the purchase price goes towards paying their commission. Make sure the agent you’re speaking to lets you know how much you’re paying for their services.
- If you are dealing with a commissioned sales person (who isn’t a licensed real estate agent), talk to the actual owner of the property to see if you could get the property at a price that excludes their commission… which can sometimes exceed 7% of the overall price. After all, many times, all this person does is show you where the property is and maybe walk around on it with you for a few minutes. By opting out of this “service” you could save thousands of dollars.
- “Bait and switch”: See a tract with beautiful pictures (but little to no description or a cut and paste general one) and drive 8 hours to see it before you lose it… only to find out that it’s the side of a mountain? We have heard this complaint numerous times about different land companies. Ask for a LIDAR scan of the land or a detailed topographic map so you can verify the terrain for yourself before wasting your time on a trip. Also, ask if you can “reserve” the property while you’re traveling to see it.
- Does the person selling you the land have the authority to commit to promises they make? Some salesmen will promise you the moon only to say later that “they tried but the office won’t approve” what the salesman promised you to close the deal.
- Does the person selling you the land have an actual, legitimate ownership claim on the property? If not, they are likely operating as an unlicensed real estate agent. The danger here is that, as a third party middleman, their only real interest is getting their commission. Real estate agents are trained to properly represent third party owners and sellers. The true owners of the land are the actual ones who will have the relationship with you for the term of your land contract. These owners are also the ones who are on the hook to back up the warranty deed you receive from them when you pay off the land. Promises made by a salesman may not make it back to the owner so it is always best to deal directly with the owners. Having a highly paid, middle man salesman here sometimes does both the buyer and seller a disservice.
- Accurate record keeping: Some land sales companies use manual entry loan servicing software that is prone to human error. You may not even know that an error in your account has occurred until you get a foreclosure letter months later. Then, YOU have to spend hours tracking the company down and proving that you are in the right. Look for a company that provides regular account statements and/or an ability to monitor your account online.
- Make sure someone is always able to be reached and the office isn’t stretched too thin. Their billing department needs to be adequately staffed and/or efficient to operate properly. Without the manpower and/or efficiency, human errors will pile up and problems that could have been caught early will fester into large issues that don’t have an easy solution. This is especially worrisome if the company decides to be inflexible in order to take the property back and resell it.
- Customer service: Make sure the land sales company has a good reputation for responding to their customers AFTER the sale. Some companies play “hard to get ahold of” hoping that you’ll just give up and deal with the problems yourself.
- Competent management: Ignoring issues, difficulty communicating, inaccurate billing, failure to deliver on promises… are all nuisances that can lead to frustration. You may even decide to give up your land to get away from the problems, losing the money you put into it and the improvements you made to the land.
- Legal Payment Processing: If your contract says that payments are due to XYZ, Inc, make sure their payment portal accepts payments as XYZ, Inc rather than ABC, Inc or some other clearing house. If they are using a third party payment collection company, make sure that company is licensed and bonded.
- The same properties appearing on their website over and over and over: This sometimes shows that a land company is more interested in “renting” land to transient buyers looking more for a cheap payment on a +200,000 sqft, open aired, wall-less, apartment with a built in landfill rather than someone who takes pride in their land and who seeks to own it.
- No background checks: Some unscrupulous individuals seek out owner financed land in order to keep their name from showing up on property records. It’s an easy way to hide out from creditors and “the law”. A basic criminal background check typically scares off buyers with a history of manufacturing/distributing drugs, domestic violence, assault charges…. etc. If you’re cool with living next to that, then search out a company who brags about NOT doing background checks (surprisingly, there are a few).
- Has the property ownership been transferred via quit claim deed from corporation to corporation. If so, this could make obtaining title insurance more difficult (or impossible) later on if you were to seek a mortgage to build a home.