Agent Not Receptive To Creative Offer
I made an offer to purchase 150 acres thru the listing agent who said and I quote ---"Thank you for what you beleive is a prudent real estate offer" he then goes on to say that "in order to purchase acreage in this area you must bring cash and close quickly".
My offer was to pay 50% in cash to seller, with 24-36 mnth balloon, 0% interest on the remaining 50%. My plan was to subdivide into 5acre building lots and sell to builders, end users or auction which is very successful in our area. I did not think my offer was that creative as to be unrealistic but obviously the agent did, and to make matters worse he indicated so----"I have not seen a creative offer like yours in over 3 years", obviously the developers in this forum either have good agents or not dealing with agents at all.
This was definently a blow to my self esteem, I could almost see him laughing at me. What methods do you use to get around agents and deal with the sellers.[ Edited by wmwealth on Date 05/28/2004 ]
wmwealth,
Glad to meet you.
Let's set aside your offer for the moment, what terms is the seller offering if any?
John $Cash$ Locke
OK,
First if it was a written offer by law he must present it to the seller. Second, why let this guy attack your self esteem? You grow apples and he is an orange farmer who'd only seen a couple of apples in his life.
In CRE you have to deal with the possibliltiy of rejection or you'll never succeed.
Now for some more creativity; write in you offer that you must be present when it is presented to the seller as a condition of the offer and see where that gets you. Getting even more creative, if you expect to make a really big profit on this bring the owner in for a share, the terms outlined above pluse say 5% of the profts over the price of the property when the property sells.
NOw I will tell you a universal truth I learned the hard way, greed blinds people to everything but the pot of gold. IT can also be a useful tool in some cases. If you pitch the offer right and show him how he will get over market value for his property in this manner then he may focus on your post of gold which you can both share....
Randall
I did'nt expect the famous john locke to reply but thanks! I never made it to the seller, what happened was that I was coming back from a fire call ( Brush fire) and the area I work in is out in the "Boondocks" , orange groves, cows, horses, etc.. I saw a sign for acreage for sale and I found out how much was being asked and for how many acres- 150 acres for $1,875,000. So I made my offer thru the company who listed the land. I usually look for FSBO but acreage is hard to find FSBO, so I have no idea of the sellers needs or terms in this case as the agent never gave me a second look.
Thanks John.
About buyers and sellers dealing directly...
What I have done in land brokering (either as the listing agent or the buyer's agent) is to request a meeting between the parties, with their respective agents in attendance. This way, the other agent doesn't think the buyer or seller is trying to cut them out of the deal. Having face-to-face contact between the parties greatly facilitates communications and negotiations, particularly if one of the agents is clueless about land.
About the structure of your deal...
I don't know the land buying customs in your area. In my area, if the builder or developer asks for the seller to take back paper (and subordinate to the lender), then the take-back provides for interest-only with some sort of balloon. Otherwise, what is the incentive for the seller to not get paid 100% at closing, except perhaps for tax savings?
About "closing quickly," again I don't know if that is what's being done now in your area because of the extreme sellers' market. If builders and developers are buying as is where is (with no discount in price), then you would have to decide if it was feasible for you, particularly since you're looking to assign (flip). However, I would caution you to have a RE attorney involved and get at least a contingency for an up-front feasibility period. Your risk is greatest, obviously, buying as is: you (and therefore your assignee) don't know what development scenario will be approved and you've got a shorter time frame to find a buyer to flip to.
Ask for the meeting with the seller and the agents.
Thanks Stockpro99 I wanted to do just what you suggested, but in the offer to purchase I did not get to creative as I did not know if my offer would get presented, even if law were on my side. I did intend to bring in the seller as partner if he did not like my original offer, but this agent said that someone with cash was going to close on the property in two weeks. I just feel as though I would have had a better chance dealing with the seller directly- No offense to any agents on the forums. I do understand that if an agent has two offers one for cash now and one with little cash now and lots of cash later he will be more inclined to promote the all cash buyer.
Good post though, I am hoping to use the strategies with sellers face to face.
wmwealth,
Another thought here.
If the seller wants top dollar and a fast close and is not willing to negotiate either time or price, then I'd pass. Check back with the listing agent in 2 weeks to see if that cash buyer with fast close got the property. StockPro is right about greed. Unfortunately, if the market there is such that sellers can get top dollar without having to wait months (or years) for the payout, this may not be the right property to take the leap on.
Thanks Nancy, I guess a meeting between the parties would be a good way to present offers and not make the agent think you were cutting them out. I did'nt expect to get a 0% balloon second but I learned on the forum to " ask for everything, it cant hurt they can only say no"
Nancy as far as subordinating to a lender, would that only be necessary if I needed to secure a construction loan?
If my plan was to just improve slightly by dividing land in to 5 acre plots, would this cost be enough to justify lender involvement? I hope I understood correctly.
Nancy, it definently is a sellers market down here and unfortunately not all agents/brokers are investor/developers like yourself. I have begin to look in other areas, the area I grew up in is urban , the area I live in is suburban, and the area I work in is rural. The urban area seems to be the only place you can buy lots for under $25,000 and even those sellers are asking more, not because they are worth it but because the TV and radio tells them that land is being sought after and top $$ being paid. So maybe I will stick to looking for single building lots in run-down areas of my city. HML only loan up to 50% ltv for vacant land so unless I am buying large tractsof acreage its not feasible to use one.
I will be a developer of something, one day.
wmwealth,
Thank you for your kind words.
Let me get this straight you offered 50% down on a $1.8 mil deal and the agent sluffed you off.
Since you asked how do you get around agents, I really don't, however, when I do my direct mailing, if they should happen to go to someone who has a listed property and the seller calls me, I am up front in saying I do not deal with realtors.
9 out of 10 times I am invited to see the property anyway, before I purchase the property I show them a "Request For Unconditional Release Of Property" should they desire to fire their realtor.
The longest I have had to wait for a realtor to sign this is about 30 days. In your case, however you have already contacted the realtor so this method will not work.
Some successful land buyers I know use straw buyers to make offers on properties they are interested in, normally someone who can put down $900K would fall into this category. This way you can get a feel for what the owner wants or the straw buyer can make an offer on your behalf.
I hope you see some ideas that may work for you it is not to late on this property if you get creative.
John $Cash$ Locke
Thanks John(L), my offer was based on the fact that the HML I was going to use would fund up to 50%LTV for vacant land, I wanted to use that to leverage my way in, I could have closed in 48hrs if need be with the HML's money of course, and gotten creative with the balance owed, I must say that I did also try to negotiate a slightly lower purchase price as well, but there was very little negotiation as the agent said that he had an all cash investor( I don't buy that one) make a full price offer. Better luck next time I guess.
How are you developers finding unlisted land to pursue, as the competition would be slightly less and sellers would be more open.
wmwealth,
As for the seller subordinating...
That would be necessary if somebody (you or your assignee) intends to get secured financing.
About dividing into 5AC lots, impossible to tell what the costs would be. Have you done any calcs based on min. lot width requirements? If you go the assigning route, then your costs are soft costs--engrg, legal, due diligence.
About unlisted potential sources of land...
You've got a couple of options. What I have done as a broker is decide on an area (township, town, etc), go to the municipality and ask to see the list of properties currently in the approval process. Then choose some and ask to see the files. This is public info. If someone's starting the approval process, chances are they're thinking of selling.
Another thing is get the zoning ordinance, map and utility maps and take one section at a time and contact owners of properties that you think might fit your criteria (size, utilities, land uses). This takes time, but from my experience, you will get contacts from owners. It may take months so you might not get a response right away. But if they want to sell, they'll definitely get in touch. Of course, put in your letter that they wouldn't have to pay any RE commissions. That puts you at the top of their list.[ Edited by NancyChadwick on Date 05/28/2004 ]
Nancy, it is zoned AG-5 which down here means 1 dwelling per 5 acres. I did not calculate any of the costs, I did not want to be premature in my assumption of acquiring the land.
When obtaining financing are soft costs included or is that something that has to come out of pocket. I intend to do very little in the form of structural erecting, I would like to develop on the smaller scale of making the land more valuable to another builder or developer and allowing them to build, this would allow me to watch and learn before attempting to do it myself.
That being said are "soft costs" all incured prior to assigning to a developer/builder?
wmwealth,
It depends on when you do the assigning. Suppose you assign during the upfront feasibility period versus assigning after you're months into the approval process. If what you need is some funding to cover due diligence or approval costs, and you're not getting involved in closing on the property and building it out (horizontal and vertical improvements), then explore a line of credit secured not by this property but by property you already own--like your home.
Thanks Nancy ,I think thats what I was looking for . That makes sense. I don't intend to hold the property very long as I am sure the more I do the more cost incured.
Iam also investing in purchasing a course for profiting in Land investing/developing to further educate myself.
Thanks to all who replied ,very helpful as always.[ Edited by wmwealth on Date 05/28/2004 ]
Check out additional zoning requirement. There are parcels in CA that although the should be sub-dividable, they aren't do to "anti-growth" provision.
also learn about geotechnical issues. Was the place a swamp 200 yrs ago and isn't buildable.
As to you offer, pretend you were the seller, you can get 100% a COE, ot this "funky" 2nd. WHich would you do?
If you're hot for the property, make it worth the sellers while. Give me the financing break and I'll give you a backend kicker.