Did you know that you don’t need a realtor to sell land? Real estate agents can put land up for sale, but they focus on residential properties. Because of their preferences, they tend to lack experience when selling land.
Realtors can be expensive; an agent can receive anywhere from 3 to 6 percent commission on your property’s sale price. Five percent can be a large chunk of the closing price.
For example, let’s say your property sells for $100,000, and your agent’s commission is five percent. That’s $5,000, not a small amount of money.
Selling your land yourself helps you avoid the real estate middle man. There are certain things you can’t avoid, however. You’ll still need the proper legal documents for selling land even with our help.
There are several pieces of documentation that you’ll need for the sale of your For Sale By Owner (FSBO) property to go through.
What is For Sale By Owner?
For Sale By Owner refers to selling land without involving a realtor. As mentioned, the advantage of selling land this way is that you don’t lose money by paying an agent.
You do have to provide the documents needed to sell land by owner, though. These papers won’t be any different than any forms you’d provide with the aid of a realtor.
The only difference between putting together documents for an FSBO property and a realtor sale is that you’re responsible for gathering the paperwork.
If you were working with an agent, they would help you get the papers in order.
What Documents Do You Need for Selling Land?
Trying to sell a piece of land without documentation can ward off potential buyers. Lack of proper paperwork may imply that there’s a scam going on, even if there isn’t.
Here’s a list of the legal documents you need to sell land.
Your property’s title denotes you as the legitimate owner of a piece of property and provides information about your rights to it. Titles also inform the would-be buyer about resources, easements, liens, and usage rights.
Your title should have your name on it. If it doesn’t, you may not own the land.
It’s common for landowners and buyers to confuse the title and deed. The two documents are not the same thing, though.
The purpose of a deed is to dictate the terms of the sale and facilitate your ability to give the title to someone else.
The land ownership will not change to the buyer without a legal copy of the deed on record.
Property Contract Information
A potential buyer needs to know about any contractual agreements before they buy. There are three kinds of property contracts that allow other people, groups, or entities to use your land: leases, easements, and licenses.
A lease is a contract between two parties that where one party gives the other the right to inhabit “real property,” which includes land, what’s attached to it, and land rights.
Leases aren’t permanent arrangements and only last a specific period. Typically, renting an apartment involves signing a lease.
An easement essentially provides or revokes permission for the use of the owner’s real property. There are two kinds of easements:
- Gross – grants rights to the owner instead of being attached to the land
- Appurtenant – connected to the property and stick with the land even after sale
Unlike appurtenant easements, gross contracts break if you decide to sell your land.
An example of a gross easement would be if you allowed your neighbor’s kids to use some of your property to play baseball.
An appurtenant easement is letting the electric company maintain a powerline on your property.
Licenses are when property owners give entities or organizations permission to use real property for a particular purpose.
Land licenses work similarly to those for intellectual properties – in which they’re tailor-made for a singular person or entity.
Licensors (person granting the contract) can take a license from the licensee (contract receiver) by whoever presents it, and the homeowner can’t give it to anyone else.
A property or plat map is a document that notates where the boundaries of your land begin and end. It’s crucial to have a plat map on hand when you sell your property so that buyers can see what they’re purchasing.
Property maps also help smooth out potential complications such as building fences. A fence should be constructed 2 to 3 inches from a neighbor’s property line.
Neighbors and landowners frequently split responsibility for fences built directly on property lands. Knowing where plat lines lie can aid with keeping outbuildings off another person’s ground, also.
Any land survey you provide to the buyer should be recent if there have been changes to your property boundaries. Property maps also help locate easements and utilities like water and sewage pipes.
“Assets” in this case mean anything you’re selling with the property. Buildings, a fleet of lawnmowers, outdoor furniture; you should list any tangible item with value that’s for sale.
The asset list is for the sake of transparency. You should fully disclose the price of any extra items you’re selling along with the land to the buyer.
Your list can also aid the new landowner with taking inventory. If the buyer does know they’re buying additional assets, it may be helpful to have an organized list that tells them precisely what and how much they own.
Property Tax Papers
The property tax papers are for the buyer and the IRS. The income tax forms will give the buyer exact information on how much taxes they must pay each year.
You can tell the buyer how much property taxes you paid each year, but physical documentation can help build trust in the deal between both parties.
Reporting to the IRS
Whatever profits you make from selling land are considered a capital gain and must be reported for taxation purposes.
The amount that gets taxed is the sale price minus the original amount you paid for the land. You should add all of this information to the tax forms for the year you sold the land.
Long- and Short-Term Gains
There are two kinds of capital gains you can receive from selling land: long-term and short-term.
- Long-term gain – profit from a property owned longer than a year
- Short term gain – profit from property held less than a year
How long you have the land before the sale determines how much you’re taxed as well. Long-term gains are taxed less than short-term gains.
There’s a tax rate of 15 percent for property held longer than a year for people who receive significant tax returns.
People in lower-income tax brackets don’t pay any tax rates for a property they’ve had longer than a year.
Owning property for less than a year before the sale may result in as high as 35 percent tax rates.
Proof Of Income
Proof of income here doesn’t refer to what you do for a living but rather if there’s any source of income on the land you’re selling.
Sources of supplementary income need to be reported to the IRS, of course, but it’s valuable information for the new owners.
The party purchasing your land is entitled to know if they’re getting anything that can potentially bring extra money into their pockets.
Owners should also be able to decide whether they want anything to do with the source of income.
You and the other party draft a purchase agreement once you’re ready to close the deal. A purchase agreement is a legally binding document that establishes the terms of the sale.
The seller sets their price and any conditions that come with purchasing the property, and the buyer can decide if they’re satisfied with the terms set.
Both parties can negotiate terms until they’re agreeable to everyone involved. The agreement should at least include:
- Property details
- Possession and close dates
- Closing costs and the person providing payment
- Situations that can break the contract
- Requirements needed to complete the sale
- Property price and finance information
Disclosure forms are paperwork about conditions, assets, and potential risks and drawbacks to a contractual agreement. Disclosure forms are supplementary documentation to purchase agreements.
These forms, in particular, make sure that all parties know everything involved with the sale. Extra fees and penalties for not meeting the contract terms are all included in the disclosure form.
If you’re selling property, you should take inventory of anything wrong with the land. Listing issues with the property upfront will inform buyers of any maintenance or repairs they’ll need to make.
Buyers also can’t back out of deals by using problems with the land as an excuse.
Are You Ready to Sell Your Land?
Above is a list of legal documents to sell land that will make your quest much more manageable.
If you want to get started selling land, then visit SellLand.com to get started today! You can learn all about our process and the Sell Land team.