Need Advice in Countering Offer on Vacant Land

[groomsie]

We bought a piece of land 10 years ago thinking we would build in the country, but life changed and we decided that was not as important to us anymore. So, we listed the property in August 2008--right about the time the economy fell apart. The land has been listed since then and we have received no offers. Until yesterday. We received an offer for $130,000 for 9.1 acres on a hilltop (half wooded, Half open). We paid $150,000 for it and are listing it for $165,000. Property prices in this area (near Madison) vary a lot, but this really is a nice piece. Not a lot of land selling right now, but this is one of the lower priced rural chunks currently listed (on a per-acre basis).

Due to the fact property taxes will quadruple this year, and other factors, we do want to move the property. But I have a probable psychological hesitation to sell for less than $150k...we will never get back what we have paid in, but since we did not buy it as an investment I've accepted that.

I do know the seller has walked it several times, that they would seem to make decent money (he is an apparent up-and-coming lawyer in the area, she is a dietician at the University hospital), they have a deal on their house closing at the end of the month, and they have as a contingency that they close a building loan with a term of 12 months--clearly they have plans to build and they want to have it built by end of 2013. The offer was sent to our realtor in e-mail with the note to call him and work out any details, so he clearly seems willing to negotiate (he's a lawyer, he loves this right?).

So, my question is where is a good counter? I'm thinking $155k or so... Our realtor thinks they'd agree to meeting half way, but my digging (finding what they do and looking at the house they are selling on line) tells me they have a plan, know what they want, and are ready to move forward, and so I think they'll meet us more than half-way.

Any thoughts or advice (preferably serious, although I have a sense of humor)? Thanks!!

 

[Bamacyclone]

Well, we've moved twice in the past 5 years and bought land in Alabama. Hard to generalize since markets are highly localized. House and 40 acres in NW Illinois sold for approx. 15% off what we originally had it listed in 2008. I fought the same emotions you state. House in Houston again sold approx. 15% off what we thought was fair market value in 2011.

Land in Alabama ( 2 ac on a lake) was originally listed for 220. We got it for 150. A buddy down here is buying 20 ac in country to build on. Nice property with a good creek. He's negotiating around 6.5k per ac.

Bottom line outside of a few select markets (like DC), I believe it's still a buyer's market. If they've walked it a couple times, seems like you've got a hot one. If you can get them to come a little that's gravy, but I guess if it was me I'd still take the 130.

 

[Clonefan94]

Sounds like a low ball offer, I'd be surprised if they aren't expecting a counter. That low though, I doubt 150 would be their number. You have to look at how much it's costing you to hold on to it and highly consider taking under 150.

 

[HOTDON]

Its a negotiation. You've got a number in your head, ask for it. Worst case scenario; they stay at $130,000, which you are under no obligation to accept, but would get you out from under the property. Best case scenario; they accept your counter offer and you have your land sold. Most likely scenario; you counter at $155,000 and they counter back somewhere between $140,000 and $145,000. You'll at leasr be a little closer to where you wanted to be.

You have a hunch that they like the place, but they know how long you've had it listed. Be reasonable and don't scare them off with anything crazy and you'll get a deal made.

 

[erikbj]

i would come back at $144K, and settle around $142K. You may not get another offer for another year plus, then you lose your opportunity costs (returns) on that $144K.

 

[Cyclonepride]

I'd counter with 153K. 12K rather than 10K off, to me, would seem like you are willing to negotiate, but close to the best you can do. Just a thought, I'm not an expert by any means.

 

[cycloneworld]

What's the land appraised for?

Assuming its near your asking price and unless you are really scared the buyer may walk, I'd counter at $155k. That's $10,000 off your asking price...that's a big sign you are willing to work with them to get a deal done.

My guess is, if they really want it, they will come back at $145k. Settle in the middle at $150k. Deal done.

 

[kilgore_trout]

Seems like the real estate market is turning around in Dane county. Stick to your guns. Why are your property taxes quadrupling?

 

[groomsie]

Interesting. I think we have concluded that we definitely have a barrier to cross psychologically at $150k but we also don't want to let them walk. The guy made it pretty clear he's open to negotiate, and he's an experienced lawyer who works defending insurance companies and contractors it torts, so he is a professional too.

As for us, we purchased this land using equity in our residence, so as it stands we have a variable rate mortgage (we took a 7 year ARM thinking by the time it went adjustable we'd be building, and while interest rates on the variable have been good to us so far given we are at historical lows we don't want to let that linger forever) we can't refinance (and it makes a move--which is ultimately what we want--much riskier with 2 chunks of real estate potentially needing to sell). Based on monthly cost of mortgage on it + property taxes, I figure it costs us $500 per month right now (assuming the rest goes to principal so if you don't drop further you'll get that back...). The way I phrased it to my wife is in a year we'd need to sell it for ~ $156k to equal $150k now...the land market will eventually turn around but we will never get our sunk cash back so it is time to take lumps (and lessons) and move on.

So right now it is just a case of making the lumps as small as possible. Thanks for the thoughts guys!

 

[breck53]

We bought a piece of land 10 years ago thinking we would build in the country, but life changed and we decided that was not as important to us anymore. So, we listed the property in August 2008--right about the time the economy fell apart. The land has been listed since then and we have received no offers. Until yesterday. We received an offer for $130,000 for 9.1 acres on a hilltop (half wooded, Half open). We paid $150,000 for it and are listing it for $165,000. Property prices in this area (near Madison) vary a lot, but this really is a nice piece. Not a lot of land selling right now, but this is one of the lower priced rural chunks currently listed (on a per-acre basis).

Due to the fact property taxes will quadruple this year, and other factors, we do want to move the property. But I have a probable psychological hesitation to sell for less than $150k...we will never get back what we have paid in, but since we did not buy it as an investment I've accepted that.

I do know the seller has walked it several times, that they would seem to make decent money (he is an apparent up-and-coming lawyer in the area, she is a dietician at the University hospital), they have a deal on their house closing at the end of the month, and they have as a contingency that they close a building loan with a term of 12 months--clearly they have plans to build and they want to have it built by end of 2013. The offer was sent to our realtor in e-mail with the note to call him and work out any details, so he clearly seems willing to negotiate (he's a lawyer, he loves this right?).

So, my question is where is a good counter? I'm thinking $155k or so... Our realtor thinks they'd agree to meeting half way, but my digging (finding what they do and looking at the house they are selling on line) tells me they have a plan, know what they want, and are ready to move forward, and so I think they'll meet us more than half-way.

Any thoughts or advice (preferably serious, although I have a sense of humor)? Thanks!!

Based on the initial offer,I'd say they are expecting a counter to that (I'm a homebuilder), but I think your realtor is thinking the right way on this. You can get more than the offer, but do'nt get too greedy, or they might walk. I just went through this with another couple, and they walked away,because there is more stuff opening up out there.

 

[peteypie]

I'd counter with 185, am I doing this right?

 

[groomsie]

Seems like the real estate market is turning around in Dane county. Stick to your guns. Why are your property taxes quadrupling?

I think it is turning a bit, but vacant land is slow by all acounts anytime, especially now. The land is out near where Epic is (about a mile from all the nice new $1M homes on 1 acre lots on Messerschmidt Road, overlooking that velley), and we bought it about 4 months before Epic announed their initial build. So I do think that given enough time we'd see it come up, but since we did not buy it as an investment I'd say we are out $50k-$60k (assuming we seel at $150k) and losing about $6k per year.

Taxes quadrupling because they hadn't updated the assessment since we bought it. I did a lot of calling but seems I was getting a deal for several years. So it could be worse.

 

[cyhawkdmb]

You have to figure that the lawyer family did his homework too.. Just like you did.. If I was in his shoes and saw a property that had been on the market since 08 I would absolutely send a low ball offer to start things out. I doubt he walks off any counter.. What else is out ther for sale that is comparable to your property?

 

[groomsie]

You have to figure that the lawyer family did his homework too.. Just like you did.. If I was in his shoes and saw a property that had been on the market since 08 I would absolutely send a low ball offer to start things out. I doubt he walks off any counter.. What else is out ther for sale that is comparable to your property?

Obviously land is tough...not sure if they have a minimum/maximum acreage they look at for example. Loooking in the general range and +/- 5 acres from our lot size, it looks like we are near the lowest now listed in that size range and actually about mid-range for time on market (which shocked me, although I know when we bought the market was fairly active and yet our property had been on the market a year and a half).

 

[Naughtius]

Lawyer and dietician? Sound like likely Hawkeyes.

Come back with a full price counter, and tell them that Nile Kinnick's ashes were scattered across the property.

 

[Senolcyc]

Come back at 155. They will come back at 140. You come back at 150. They will come back at 145. Sold. Take the small loss and get rid of it.

 

[DarkStar]

Sounds to me that the lawyer is trying to find out how desperate you are to sell the property. I would low ball a property that has sat on the market for 4 years.

I still can not get past your real estate agent letting the property sit for 4 years. You are not getting good advice from them or you are not listening to them. Do not know which. You need someone you can trust to tell you what the land is worth and go with that.

Since you are no longer going to build on the land you need to start thinking about the property as an investment. I do not know your market but it sounds like you have a great location. Epic is Huge. All the health systems here in Omaha are moving too it.

I can't imagine you losing money on the property. Maybe you should start marketing the property to real estate developers who are looking to develop the property instead of looking for a homeowner who wants to build.

Above all else, find out what the property is worth.

 

[Bestaluckcy]

Sounds like you have an excellent prospect. I like the advice of countering for the $153,000 or $149,500 at the least. You can always come down but hard to go back up.

 

[groomsie]

Sounds to me that the lawyer is trying to find out how desperate you are to sell the property. I would low ball a property that has sat on the market for 4 years.

I still can not get past your real estate agent letting the property sit for 4 years. You are not getting good advice from them or you are not listening to them. Do not know which. You need someone you can trust to tell you what the land is worth and go with that.

What can I say, vacant land here is moving slow--just had a friend go through something similar with land near this. As it turns out our realtor contract expires in a month, and I was going to call her a few weeks ago to ask her to release it early and let the DOM clear sooner, but I got busy and didn't call her and then she call that night with news that this person was looking at the property. So our realtor doesn't know she is close to being let go, but she is generally considered to be on eof the best in the area for vacant land.

Since you are no longer going to build on the land you need to start thinking about the property as an investment. I do not know your market but it sounds like you have a great location. Epic is Huge. All the health systems here in Omaha are moving too it.

I can't imagine you losing money on the property. Maybe you should start marketing the property to real estate developers who are looking to develop the property instead of looking for a homeowner who wants to build.

Above all else, find out what the property is worth.

Maybe, but it is so interwoven into our house situation (our home equity is in that land, which is fine if you build on it and sell your residence as we planned, but not so cool if you change plans) that we have a mortgage on our home that has gone variable and we can't even consider a refi because the equity is on the land. To recoup all you have into it (mostly interest) would be almost impossible. The topography of the site is such that you could only put a few houses up there, and the township has restrictions to decrease sprawl and so we simply can't subdivide it, so no avenue there to realistically make this come out ahead as an investment, at least that I can see. This is basically restricted to being a residential lot, and the land market isn't going to (realistically) improve in a short enough horizon to make holding it long term anything but punitive. Good thoughts though, thanks!

 

[Wesley]

You have to figure that the lawyer family did his homework too.. Just like you did.. If I was in his shoes and saw a property that had been on the market since 08 I would absolutely send a low ball offer to start things out. I doubt he walks off any counter.. What else is out the for sale that is comparable to your property?

I would say 150k, what you originally paid for it. This is like a solid floor that you can wait. My wild guess is there will be other buyers next spring after the elections.