When it comes to the niche of raw land deals, it is most definitely a chess game. Every move, negotiation, and every signature can be the difference between a checkmate and a stalemate.
Vestright’s own, Cody Bjugan, with years of experience tucked under his belt, has ridden the waves of this bumpy see and still came out stronger on the other side.
Maybe not always unscathed, but definitely wiser.
Get ready to learn about what Cody calls, his ‘worst raw land deals’ and the lessons he learned from them. Learn to navigate through the trust issues that have the potential to turn negotiations into minefields in the very heart of land and armed with insights from our most candid and seasoned veterans.
The Trust Challenge:
Like any business, trust has the potential to make or break it. In one of Cody’s first deals, he goes into a situation that tested this concept with a particular property owner with whom he tried to strike a deal.
This owner had seemingly the most unshakable trust issues which ended up becoming the biggest obstacle in their business dealings.
For example, any request for a signature, whether it was for extending time on a clause or altering a term, it became a battleground. Cody believed in building trust through education but this owner’s persistent lack of trust made completing the deal challenging.
Does this owner trust us today? Per Cody, not quite. However, “I think we might have a shot of him trusting us now and you know why that is? Because we successfully closed the transaction, even though he fought me through the whole entire process,” as he said.
Though he wouldn’t call this a failure, Cody does admit that it was the trust issues specifically, that made the deal extremely challenging.
But how do you avoid this?
- Transparency ALWAYS:
Make sure you always have open discussions with the owner, transparency will always alleviate potential misunderstandings. Before, you end the conversation make sure that both party’s fear, concerns, and expectations have been addressed.
- Education:
As Cody said previously, trust can always be built through education. Consider either organizing or recommending workshops or lectures that focus on the intricacies of land deals (Vestright hosts webinars that go through this exact process.) This way, clarity is assured and anxieties are reduced.
- References:
Offer testimonials or references from past clients and/or business partners. Positive feedback from previous transactions can always help to reassure the property owner of your credibility and intentions.
- Regular Updates:
Never leave your client in the dark, be sure to keep the other party informed about every step of the process. Especially since regular updates can foster a sense of involvement and reduce feelings of being left in the dark.
- Written agreements:
This is not to say that verbal agreements can’t be binding, but it is always safest to document everything in writing. Clearly outlined terms will be your best reference point and will minimize most, if not all disputes.
Incorporating these 5 elements will help not only bolster trust but also ensure smoother transactions, even if they face initial skepticism.
Tackling The Jurisdiction:
Imagine the excitement and anticipation of brokering a new land deal, only to realize that the political landscape changed almost overnight.
Cody dealt with this exact situation, specifically with his deal as a mayor fresh into the role. This mayor especially, made his decisions heavily based on the public and their responses, which oftentimes lead to decisions made that seemingly contradicted city regulations.
Completing the deal was very difficult, it was about the specifics or the deal’s merit but rather what the public thought about it and the mayor’s alignment with it.
The challenge here was to find the balance between making sure the mayor didn’t feel like he was going against the public and still that the city regulations were being followed.
Recognizing this complexity, Cody and his team made the strategic decision to rope in an expert and use a land attorney. This wasn’t solely for legal representation but rather to use it as a tool to enlighten the city administration about its codes and laws.
Bold move, yes, but effective nonetheless.
The ultimate goal for Cody really was to educate, it was about presenting facts in a manner that was undeniable. It wasn't to combat, but rather to educate and guarantee all interests were aligned.
As a result, the move bore fruit, the deal wasn’t just approved but it resulted in substantial profit.
So, how do you avoid these hurdles?
- Research:
Make sure you always update yourself on any and all political climates, markets, and trends. Also, make sure you have a comprehensive understanding of all local laws and regulations related to your land deal. This way you can confidently make informed decisions and successfully complete your deals.
- Build Relationships:
As many relationships that you can build with local officials will be invaluable by any means. You’ll gain valuable insight into potential challenges and can receive/offer guidance on navigating them.
- Communication:
Always maintain open channels of communication with all stakeholders and especially make sure you have all facts and figures clear. Be proactive in addressing concerns, and be prepared to make compromises to ensure both parties win.
- Prepare for Contingencies:
This one applies to any deal you’re in talks with, always have a backup plan. If one approach doesn’t work, be flexible and always be ready to pivot to another strategy. Especially if you deal with anything related to jurisdiction, there are always delays. Therefore, be ready to factor these into your timelines and assure there won’t be aspects of your project severely affected.
To put all of this simply, always be a step ahead.
The Financial Pitfall in Idaho:
There was a time Cody was in Idaho for a land development venture where he would pre-sell ‘finished lots’ to a home builder.
Ultimately this strategy was adopted to lock in gains and minimize exposure to market volatility.
However, the economic landscape of 2007 proved to be an unprecedented challenge. For Cody’s venture, the financial hit was severe, initially the lots were valued at a premium but then the worth dropped dramatically. The potential loss was racking to the millions.
Despite all of this, Cody’s response showed an unwavering commitment to business ethics. While some developers might have thought about bankruptcy or renegotiating, Cody went the other route.
He ensured all promises were kept and that every contractor, consultant, and associated party was paid in full, even if it meant dipping into personal funds.
Though this decision was financially taxing, Cody set his reputation in the industry in stone.
When put in a similar situation, consider these strategies to try and avoid risks:
- Diversify:
Consider investing in multiple projects across different locations to spread the risk, this way you’re shielded against most downturns. Don’t put all your financial eggs in one basket.
- Market Research:
Always be informed and always be ahead. Regularly monitor trends, forecasts, and global financial news, especially before committing to large projects.
- Maintain financial reserves:
Prepare for rainy days, try and make sure your contracts are prepared to be adapted for any downturns, especially in markets.
- Always learn:
Be sure to always educate yourself on any and all new strategies and technologies that can help mitigate risk as much as possible. Learn from peers, mentors, and your own past projects.
- Build strong relationships:
When you maintain good relationships with anybody you deal with- contractors, supplies, stakeholders, etc. – you’re more likely to get concessions during touch times. Remember, renegotiating will be more fluid during downturns once mutual trust is established.
Takeaways:
Each setback should always be seen as an opportunity, especially to learn and grow. Success isn’t in never failing, but in rising everytime you fall.
When venturing in raw land, remember persistence, trust, and proactiveness are invaluable tools to always have and success is almost always inevitable.
Discover how a single land deal can outperform 100 real estate transactions by addressing the housing shortage in the United States. To learn more about this innovative program, click here to speak with our team.
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