Land purchase thoughts

[thatguy]

I am looking for your thoughts on how much of a premium you would pay for a piece land that you really wanted

We own 7.3 acres and built a very nice house on it.. We have excellent views of the mountains (peaks of otter) which we really dont want blocked..The 2.5 acre lot beside our house that just went up for sale.. IF someone was to build a house near the front of the lot they would really block our views..


The lot for sale originally sold for about $42k around 2000ish.. it was then resold for $50k in around 2004ish.. The current owner had planned on building but I dont think he could sell his lake house. he 'said' they bought another house instead of building on the lot, but the county website shows he still owns his lake house and has not bought another home. In a casual conversation the owner said he doesnt need to sell the lot, but would have some negotiation room on price..

As a reference - There are two 2.5 acre lots across the road from us are also for sale.. Originally these lots were listed at around $42k each (and most of the other lots have since sold for nearly that price - it appears that $40kish is about right for a 2 to 3 acre lot) - That developer has dropped the price to $20k for one and $26k for the other trying to move them - he is/was cash strapped it seems..

They are asking $65k for the lot beside us now.. Would you pay a premium to buy that lot so that you keep your views? What would you think would be a 'fair' price, knowing he probably wont sell for less than he paid for it..


Just curious on your thoughts.. I hate to pay a premium, BUT it may be a small price to pay if our scenery is ruined. it would also give us a 200' buffer on that side.. Otherwise its only 75' from our garage to the lot line..

Brian

 

[mikim]

If you plan on being there for 20+ yrs buy it all. At any price - in 20 yrs it won't matter what you paid for it.

 

[IslandTractor]

If I were in your shoes I'd pay a premium but not his asking price. Give him an opening offer and make clear what the asking price of the other lots is currently. You may be his only chance to get any sort of "premium" over what the other lots are being sold for this year. If you thought $40-45K was reasonable that would seem a good starting point.

It is worth a premium as otherwise you will be kicking yourself for years but it's necessary to see the strength in your own bargaining position too.

 

[MossRoad]

Well, seeing how our first house cost 20K and our 20 acres in the country cost 30K and our current house cost 65K, I would have to say that I, personally, would never pay that much for 2.5 acres! :laughing:

Plain and simply put, however....

If you want it, and you can afford it, and you did all appropriate consideration of spending that money now and how that will affect your future, then you should buy it or regret it later.

 

[dooleysm]

There is a 2 acre lot adjoining our 10 acre lot/house. The adjoining lot has a rundown doublewide on it that the previous owner had foreclosed. I talked to the bank before it went through the sheriff's sale and got a feel for about what they wanted. It went for $54,500 at the sale.

You can buy all the land you want around us for $6000/acre. I would love to have that lot, but not at that price.

From what I've seen of the other trailers around us, they come up for sale every few years, each time the asking price gets lower and lower. I can afford to wait, I'm not going anywhere. Land isn't that scarce around us that it would be worth it for someone to buy a lot and tear down the trailer to build something bigger. I am pretty confident that if I bide my time I will have a chance to buy the surrounding lots in the future for a more reasonable (to me) price.

Your situation is different though, as the land is bare. It's a decision you will have to make. Just think how you'll feel if someone does buy it and move in a junky trailer. It's common in our area, I'm sure it's not as common elsewhere.

 

[dmccarty]

What are the comparables? 40K? Sounds like the developer is asking for a third of what this guy is asking. Has anything else sold in the area?

We used to own a lot in our subdivision that we sold off years ago to help pay for our house. The lady bought it intending to build. She now has it on the market. They have only had one person seriously look at the lot that we have seen. The lot has been on the market for at least six months. Land is not moving in my area at all.

Unless there is something very wrong with the developers two lots, I don't see how the guy will sell the same size lot for 65K. Until the two cheaper lots sell why would someone buy his lot for 65K? Seems like you can wait.

Depending on the comparables it seems the seller would be lucky to get 40K much less 50K or 65K.

Later,
Dan

 

[eepete]

I don't know squat about real estate, but I do know about the lot next to me. We bought the 10 acres next to our 10 acres when it was in foreclosure in the mid 90's. Very good move.

I'd offer the seller the $42K that things were going for. This lets him say he got what he paid for it, not a bad claim in todays market. He'll proably say no. Anyone buying into the area will see the distressed sale price lots in the $20K range and get those. The reason for making the offer in the $42K range is (1) you might get it, what a win (2) if the seller suddenly needs the cash, he can come back to you. Basically, if he decides for any reason it's just time to get sell it, he knows you're ready.
So then the only way to get scooped is someone willing to pay more than $42K and not buy one of the other lots at half the price.

Agree with others that the $42K (if you can swing it) is a fine price when you're looking at a 20 year period of living in your current house. Also I think if it sold and had never offered anything, you'd be kicking yourself.:mur:. So offer what every you can swing and see what happens.

One other thought: We bought our current land when economic times were not too good back in 2002. We did a owner finance. So no bank loans, fees, etc. The seller gets the money in smaller chunks which works out better for their taxes. No realtor fee (may or may not apply to you). So maybee the owner would do a 5% 5 year owner finance? Net result is more money in the sellers pocket (no real estate fee, smaller tax hit, some money from the interest at a time when it's hard to get 5% on cash). This could make the lower price than they wanted something they can stomach. Just a thought...

Pete

 

[MarkV]

I agree with the idea of offering the 2000 price. He will never see the 2004 price plus that he wants. He will turn you down and tell him the offer stands if he changes his mind. If he really doesn't have to sell, well you tried. If he leaves it on the market for a year with no offers, he may look at the 2000 price more favorably. When comparable lots in the area are listed and not selling in the 20's you would be paying too much of a premium in my opinion.

MarkV

 

[Gale Hawkins]

If you plan on being there for 20+ yrs buy it all. At any price - in 20 yrs it won't matter what you paid for it.

Mike's is the only post you will remember from this thread if you DO NOT buy it is my prediction.

 

[2manyrocks]

He's going to try to get a premium price from you. Is there someone who would act as a strawman for you to negotiate with him?

Local realtor knew our church wanted an adjoining lot for parking expansion so he priced it high at $75K maybe two years ago. He ain't sold it yet.

 

[mjarrels]

Times are tough... We have lots next door priced at $200,000 for 1/4 acre lots... Yep, on the golf course fairways. Not selling. Great views... Not selling. Again, times are tough, We buy basic foods, (eat pretty good) Girl stuff and I have soap in the shower. Offer 60% less than asking offer.

mark

 

[Will_C]

That's a tough situation. If you are going to be there long term, I would not quibble over a few thousand. However, the seller knows that you are a motivated buyer, so he has leverage. Only yo can decide the premium you are willing to pay.

Will

 

[bp fick]

Leverage works both ways. A teeter toter goes up and down.

Yeah, he knows you are the motivated buyer, but what are the odds he has ANYONE else willing to pay anywhere near that price? To other buyers, the other lots are much cheaper, and yet? Gee Whiz! They sit for sale.

I can't know the momentum of your local real estate market. But nationally, real estate is still sinking, not rising. It's public knowledge and reported on the news, on the interest news, etc.

Perhaps a contract? Granting you right of first refusal? That way he gets to see if there really is anyone else willing to meet his price, (which I doubt) but hey, if he should get some kind of lucky and make a hole in one, you'd still get to top that offer.

 

[eepete]

bp is on to a great idea :thumbsup:

For $1K, you get the right of first refusal. If someone offers to buy the land, you can buy it for the same price. So he gets $1K more than the highest offer made from you if that's what you want. If you pass the other party gets to buy the land and you get your $1K back when the land is sold (this removes incentive for fraud and shenanigans by the seller via some straw-man shill).

Of course a lawyer will have to turn this into a 5 page document...

Pete

 

[CurlyDave]

I really like the idea of a strawman purchaser. Someone who can hide your identity from the seller.

Offer a fair price in today's market and if the owner comes to you tell him you can't meet the offer he has. That way he won't feel like he has you over a barrel and will probably take a reasonable offer.

 

[schmism]

You might contact a Realtor and have them contact the property owner on your behalf.

Find out what fair market price per acre is based on previous 2 years sales and have the realtor offer 10% below that hopeing that by the time you do the back and forth thing a few times, you wind up close to the fair market value you researched.

 

[AlanB]

I am buying an adjoining piece of land to me for what most folks say is an unreasonable high price for what it is (7k an acre)

I would prefer to not end up with a subdivision next to me.

The regrets I have had to date with land purchases are pretty much that I thought it was too expensive, and on reflection a couple of years later thought, dang, wish I had bought that at that price.

May be on a different end of it in a couple years, but I will still have the land

Hoping to do an owner finance on the landlocked 20 acres behind it next.

 

[Ken45101]

He's going to try to get a premium price from you. Is there someone who would act as a strawman for you to negotiate with him?

That's exactly what I was thinking. If he knows that you really want that particular piece of land, he can expect a premium. Find a relative or friend to make an offer.

Of course, a lot of people want more for what they have than it is reasonably worth in today's market. It's possible that he is willing to wait forever to get a high price....or he may be financially strapped and close to foreclosure. It would help your negotiating position if you knew which.

Ken

 

[polo1665]

Leverage works both ways. A teeter toter goes up and down.

Yeah, he knows you are the motivated buyer, but what are the odds he has ANYONE else willing to pay anywhere near that price? To other buyers, the other lots are much cheaper, and yet? Gee Whiz! They sit for sale.

bp fick has hit the nail on the head here.
This guy is asking 50% more than the lot went for before the bottom fell out, and roughly three times what the same size lot is selling for now. IF you really, really, really, absolutely have to have this piece of property I would not go over what the seller originally paid for the 2.5 acres.
It's the way the market works, nobody else (in their right mind) is going to pay him his asking price for that land. Some small premium for a choice piece of property may be acceptable, but over paying that amount would not be fiscally responsible in my book.

If I was the seller I would be having a few choice words with the contractor who is liquidating the other lots.

Mark

 

[buckeyefarmer]

As I look around at land in the shenandoah valley, it seems asking prices are still pretty high. Right now there are two 11 acres lots for sale across the road from me in MD. They have dropped the price from $280K to $200K each. Down the road someone subdivided a 1 acre lot, and is asking $200K. A few years back, 20+ acres fenced and 2 barns next to me were for sale for around $200K. At the time I thought it was high and didn't pursue, now I wish I had at least tried to buy. Neighbor on the other side outbid someone for it.