Frustrated...
well, I have been pursuing what could be an excellent future subdivision for some time.
Specifically, I've been trying to partner with the landowners or act as a "consultant" for them to make it happen
To no avail :-x
They have come down on the inflated original asking price but it is still way overpriced.
They still may be open to a partnership of some sort but I cannot waste anymore time on this. I am holding out hope that they come to their senses and realize they need to drastically cut the price or team w/someone (ooh, ooh, me, please, me 
).
The ball is in their court, obviously, and last time we talked I was clear what I would be interested in and told them if they changed their minds to give me a call.
SO, my question is this as I sit here back at square one....
What would your next move be?
I have about $8,000 in cash in my money market and access to a LOC (although I'm not sure how much).
I want to enter into development but also want to create more liquid to make that easier...
Currently, I am looking around for parcels that may be conducive to CSM for the sake of ease and lower cost but also always considering wholesaling homes (via shortsale, etc).
Any thoughts are appreciated as I am frustrated right now.
Thanks all.
Don Heckel
CSM?
If people don't want to sell, they won't
There's a short sale opportunity here.
About 3M in debt place is worth 2.5. He jhas it listed at 14.5M. Rediculous.
Check out SFR parcels that you can build as owner/contractor or partner w/ a GC.
Other oppotunity for redevelopment are of crappy 1920 vintage houses of 800 ft on a 15K sq ft. lot.
You can do alot w/ 15K
CSM = Certified Survey Map
Thanks.
deheckel,
There is nothing to be frustrated about. Sellers with extreme expectations are the norm not the exception.
All you can do is put your best offer out there. Make sure you know what there needs are. You may be able to provide something other then money that will entice them to sell.
In most cases it is pure dollars that count. If this is the case here, move on. If you keep looking you will find a deal that works.
Keep in touch with these sellers. Something will change in their lives and their price exspectations will come back to earth.
If it is a great property you may see if you can purchase a right of first refusal from the Seller.
You make your best offer and move on. If an owner wants more then you are offering then you are not going to be the buyer.
8K seems like too little cash for most development deals. Looking at other options as you suggested to build up a better cash position sounds like a winner.
Keep the faith. Find sellers who want what you have to offer.
John
[addsig]
So about 15 or 20 years ago I'm negotitating with this sicilian guy who has this real dump of an apartment building-- a real slum. So we go back and forth on price. I make a pretty good offer (I thought) he counters I come up a little. He actually counters higher than the prior round.
After some weeks and months of this I get tired of dealing with him. So I find an attny who speaks fluent Italian (traffic attny knows absolutely nothing about real estate) and the attny calls the seller up and they have a conversation in Italian that goes something like this,
"Mr.------ my name is ----------- and I am an attny representing Mr. -------- who you have been negotiating with on your apartment building. "
"Ah," says the seller "You speak italian1?1"
"Yes, my mother was from Italy"
"What part?"
So this goes on for 20 minutes talking about the old country and etc. etc. all in italian. And after 20 minutes or so my attny says ,
"Well, Mr.------ its been very nice talking with you, I don't get enough opportunities to practice my Italian but I really must go back to work. I just wanted to explain the purpose of my call. As you know, you and my client have been negotitating on this building for some time now and my client thinks you want too much for your building. But before he walks away from the negotiating table he just wanted me to call up and make sure that this problem of not being able to reach an agreement as to price was not a language problem. So, really, what's your best offer because this is the last chance you are going to get to sell this building to my client."
Guy dropped his price $80,000 on the basis of that phone call. Attny charged me for 30 minutes of his time-- $75.00
The point is, sometimes you gotta convince them you're willing to walk. Frustruating? Yes. Necessary? also yes. Part of the game? you bet.
Don,
I'm sorry it's been a frustrating experience for you. Another poster here suggested doing an option on the property. How about casting it as follows.
You get an option to buy the property for X$ (the price you feel is reasonable with your contingencies). Term of the option is one year. However, during that year, the sellers can sell the property to someone else but only for Y$ (the price the sellers are asking or, say, within $100K of that price). If by the end of the option period, the sellers don't have a fully-signed purchase contract with another buyer for Y$, they must sell to you for X$.
If the sellers really believe their property is worth Y$, they should give you the option. On the other hand, if they aren't willing to give you this type of option, then even they believe it's unlikely that a buyer wlll come along and pay the number they're asking.
You may have already explained to them that time can be an enemy for a land seller. There can be changes in zoning and subdivision ordinances and land development laws that can diminish the value of the property because the changes negatively impact the feasibility of developing it.
See if you think it's worth a shot.
As for other opportunities, I would start checking with individual municipalities to see what properties are in the subdivision or land development approval process. I've found that owners of these properties are often thinking of selling.
Nancy
Thanks for all the input and suggestions everyone.
I realize I can't "force" this to happen but I really felt like I was developing a "rapport" with the owners, well 2 of them.
That's more the source of my frustration.
Nancy,
As usual you offer great advice (pspiers too) and my Plan "B" for this parcel was to pursue an option but after my last conversation with Joan (one of the owners) I thought otherwise.
I will pursue the option, what the heck do I have to lose, save some option money?
Thanks again.
Don :-o
Don,
You're welcome. Please let us know how the "I'll bet you" option (LOL) works out. Got the fingers crossed for you.
Nancy
Just an update for those interested...
I am finally meeting w/my lawyer today to pick up the option offer.
I will be mailing it with a check (option deposit) and a letter "justifying" the offer price.
One note, Nancy you suggested I add a "contingency" that if the owners receive an offer w/in x amount of the original asking price w/in the option period, they could pursue it....
My lawyer said that we can't do that.
I took his word for it as he is a straight shooter and has been around awhile.
Any thoughts on that?
I am very excited about this although I am not getting my hopes up.
FWIW, the property is still FSBO and has had no offers yet (going on three years).
My hope is, if nothing else, they want to partner with me.
Thanks again for all the input and concern.
More to come...
Don
Don,
Is the property in Milwaukee? Maybe I can come up and help negotiate.
Mark
Mark,
The property is in Waukesha County, immediately west of and adjacent to Milwaukee County.
Don
Don,
Suppose the price the sellers want is $1.5 mil and the price you're willing to pay is $650K. What I had in mind is that the agreement between you and the sellers would contain provisions saying that for a period of 12 months from the date of signing, the sellers could sell the property to somebody else but only for $1.4 mil or higher. If at the end of the 12 month period, the sellers were unable to produce a bona fide, fully-signed agreement between them and Buyer "A" for $1.4 mil or higher, then the sellers would sell to you for $650K.
Here's the best analogy I can come up with.
It's not uncommon when an agent or broker goes for a listing on a property that the sellers say they want an "exclusion" to the listing contract because they know somebody they think would buy the property. And if that person bought the property, the owners don't want to have to pay the agent a commission. What I have done in the past in such situations is tell the sellers that they should try to sell the property to X for $______ for 30, 60 days or whatever. At the end of that time frame if they didn't sell the property, then my listing contract would go into effect. Once my listing contract started, X could buy the property but wouldn't be an exclusion and the sellers would have to pay my commission.
In your situation, you would be telling the owners that for a period of _____, they could try to sell the property to somebody else for $1.4 mil, but if nobody signed an agreement with them in that time frame to buy the property for $1.4 mil or higher, then the sellers would have to sell to you (or grant you the option to purchase the property) for $650K.
I'd be interested in knowing why your attorney feels something like this couldn't be done.
Nancy
Nancy,
I think that is an excellent tactic to use when negotiating to purchase an over priced property. Have you ever seen it work in real life? What have been the Seller's reaction/objection to this idea? How do you overcome their objections?
I look at properties all the time that are priced way out of line. I know that on certain properties, I am the absolute best buyer. It just blows me away when I can't cut a deal with a motivated Seller on a property that nobody can realy compete with me on. We both lose. I will try your idea. Hopefully it will produce results.
pspiers,
The key is putting a time limit on the exclusion -- in other words, don't give the seller an open-ended period to try to sell to somebody else. (Like most other things in life, I learned this the hard way early in my career and took a land listing before the exclusion "expired."
I tell the sellers the truth: that an exclusion in place ties my hands -- potential buyers (or their agents) will be reluctant to spin their wheels on a property where in effect, somebody else can come in and better their offer.
This technique has worked well for me. One other benefit is that letting the sellers do their thing for X period of time before I start marketing the property removes this other buyer (who typically doesn't buy the property) from the sellers' minds--ie, the guy had his chance, he chose not to buy, so let's move on with getting the property sold to somebody else.
Nancy
Nancy,
I was thinking of using this technique more from a buying perspective rather then a listing technique. For example, I am trying to buy a tract of land that the "motivated" Seller is asking $10k/ac. The comps and two different appraisals value the property at $4k/ac, I can pay $5k/ac. Your technique may allow me to get this deal done. I will show the Seller all my data and if he is still stuck on price then try to contract giving him a set time frame to better the deal. More then likely he want find anybody to better my offer. What do you think?
Quote:
On 2004-08-19 09:22, pspiers wrote:
Nancy,
I was thinking of using this technique more from a buying perspective rather then a listing technique. For example, I am trying to buy a tract of land that the "motivated" Seller is asking $10k/ac. The comps and two different appraisals value the property at $4k/ac, I can pay $5k/ac. Your technique may allow me to get this deal done. I will show the Seller all my data and if he is still stuck on price then try to contract giving him a set time frame to better the deal. More then likely he want find anybody to better my offer. What do you think?
pspiers,
I realize that your orientation was as a potential buyer and not RE agent/broker but I think you could apply the concepts to your situation.
1. How long has the seller been trying to sell?
2. If you're thinking about a subdivision here, have you gotten a ball park idea of the number of lots and site improvement costs (not house construction but streets, curbs, etc.)?
I don't analyze price as $$$/AC but rather $$$/building lot. Has the seller provided you with any solid rationale for his price?
What I've done in situations (again as a Broker) where a land owner has an unrealistic price in his head is sit down with him, walk him through the process of how builders will analyze the numbers on the property. In other words, I explain to the owner that the value is tied to use because that's the reality. The number of acres is basically a meaningless number. What counts is the number of building lots.
I try to get across the point that the yield of the property depends on min. lot size required, features & constraints, other wastage, and that value depends on value of the end product as well as improvement costs. So pricing the property without taking into account these issues (ie, pricing by the AC) is meaningless. Builders in my area just don't buy land on per AC pricing.
Sometimes I'm successful in getting the message through to owners and sometimes I'm not. If the owners are so stuck on their price and the numbers don't work at their price, then they need to find out for themselves that nobody will pay their price.
This means that they may have to hang out on the market for some time before it all sinks in. And they have to be motivated. If their attitude is "I can wait years and years to sell", I suggest you move on.
I don't know if your seller will be persuaded by an appraisal, and of course, I don't know how the appraiser arrived at his/her opinion of value. Myself, I would be inclined to try the approach that the owner wants to sell for the best (highest) price. That means selling for development and not to Mr. and Mrs. Jones. Developers will scrutinize the numbers based on yield, end product value, and improvement costs.
Sorry for the long response.
Nancy
Well, the deadline came and went on my option offer.
)
Not even a phone call.
I'm not sweating it, I made my best offer based on solid due diligence, financials, etc. and now I will move on (while keeping a keen eye on that property
I've already got three more possibilities in the hopper.
I'm feeling great about this in a wierd way because 1) I actually made my first offer (instead of talking about one), 2) I could have easily "fallen in love" with this property and overpaid but I didn't, and 3) I was able to build my "team" (lawyer, realtor, etc).
Thanks for all the encouragement and advice...
If anything changes, I'll post.
Peace.
don
Don,
As you know, sometimes property owners just have to find out for themselves--get more "seasoned" marketing time-wise--before they realize the pipe dream is just that. Then and only then will they be ready to be motivated. Good for you in playing this out. I still have my fingers crossed that they will wake up and smell the coffee, and of course, offer you the first cup!
Nancy
Thanks Nancy.
Don