Real estate guys- A little free advice please

[TP3]

Hey yall, my wife and I are looking at a small piece of property to purchase (6 acres). This will be a cash purchase, no financing.

We have reached a stage where we are wanting to make an offer, however I am a rookie when it comes to land acquisition. Here is my question:

What is customary when it comes to making an initial offer? I don't want to lowball, but obviously there is room for negotiation. 20%? More, less? I know the realtor gets around 6% as a minimum, but how much fat is on this thing?

On the plus side, the land has power to it, a well (currently inoperable but should be viable)which I am having checked next week, and is otherwise unrestricted. No real improvements otherwise.

On the minus side, the road and driveway are quite poor, and the property needs a lot of cleanup and brush abatement. There is no septic in place. There are quite a few expensive hurdles that would have to be jumped before I could begin building a house.

The market here is quite active, although this has sat on the market longer than most. I believe that is mostly due to the old rvs and crap everywhere, and the road leading in.

I am all ears when it comes to advice. Thanks in advance.

[froghunter]

I look at things from an investment point of view. I always tell people that if your offer wasn't somewhat embarrassing then it was too high. This is done with the idea that all your money is made on the purchase. Don't use emotion and don't let the seller know you "want" the place. I wouldn't let the seller know it's a total cash buy up front. Looking broke sometimes has its benefits when folks know they can't get any more out of you.....this is uneducated investor advice.

Check for flood zones, deed restrictions, city etj, easements, current oil contracts (especially surface contracts)


Now if your buying this place for any reason other than to make money.....pick your top dollar offer 20% less, hope for a low counter offer and worse case Senerro fall back to your top dollar. In this case having cash can carry weight especially when you can offer a quick closing.

[froghunter]

That's free advice, you got what you paid for!!!!!

[TildenHunter]

6% total commission so if you aren’t going to use an agent. Start at 97% of his asking! Good luck.


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[LWD]

I look at things from an investment point of view. I always tell people that if your offer wasn't somewhat embarrassing then it was too high. This is done with the idea that all your money is made on the purchase. Don't use emotion and don't let the seller know you "want" the place. I wouldn't let the seller know it's a total cash buy up front. Looking broke sometimes has its benefits when folks know they can't get any more out of you.....this is uneducated investor advice.

Check for flood zones, deed restrictions, city etj, easements, current oil contracts (especially surface contracts)


Now if your buying this place for any reason other than to make money.....pick your top doller offer 20% less, hope for a low counter offer and worse case Senerro fall back to your top doller. In this case having cash can carry weight especially when you can offer a quick closing.

This is spot on. You make your money when you buy. If you have to have this piece of property, you'll overpay. I love buying a new car because I don't need the one at XYZ dealership that bad. I can find it or something comparable at another dealership. Sell it to me at the price I want and am willing to pay, or I'll keep going. I got thrown out of a car dealership once because they said my offers were too low and I wasn't really trying to buy the car. I was trying to buy the car—just at the price I liked!

To figure out what the property is likely to sell for you'll need comps of recent similar sales in that area. Of course, what it's likely to sell for and what you should pay for it are very different deals.

LWD

[BitBackShot]

There’s no right answer to your question. It depends on the asking price and how badly they need to sell.

If it’s been on the market a long time, it’s high. That doesn’t mean they’ll come down though. Sellers are either people that want/need to sell or people that would sell if the price is right. The second category aren’t worth messing with, but you won’t know unless you can get clues from the selling broker.

I’ve paid $121k on a property that was asking 195, 98k on one that was asking 140, 246 on one that was asking 275, and 221 on one that was asking 225. The last one had multiple interested parties and I was late to the party. The first 2 were divorcing couples that needed the places gone.

I have made money on 3 and lost on 1. The loss was small.

[BitBackShot]

Another trick is to sugar coat a low ball if you must do it.

“I know this isn’t what you’re looking for, but it’s all that I have. There’s another property we’re looking at for that amount, but we love yours.”

You can do it without being insulting.

[Preacher Man]

If you have access to closed sales in your local MLS, try to find similar sales, that have similar issues, and look at their list price to sales price ratios. That will give you an indication as to how low, below current list price, you should offer. While you are doing this research, and locating these "similar closed sales", consider how long they stayed on the market. That usually indicates that there are issues. Like lots of work that needs to be done, etc.

If you want to talk, shoot me a PM. I'm a real estate appraiser.

[TP3]

Good point Froghunter, the financing part of it should be played close to the chest. I guess lowball is in the eye of the beholder, so bottom dollar what is it worth to me is what I need to decide.

It would eventually be an investment, but its primary purpose is a place for us to live.

I am going through a realtor, but it is the one who has the listing. I guess he gets his 6% regardless, so it shouldn't really concern me.

As far as the going rate of similar properties, that is a little tougher as it is quite rural. The price per acre is about on par, although a good portion of the property is heavily sloped, and would not offer much in the way of building sites. So I feel like that deserves a price break in itself.

Thanks again yall.

[froghunter]

I once got great advice from a real estate tycoon....he told me to never say a number. Ask the seller what their bottom price was....then say well that's not really what I can do....can you go any lower? He has 800 rentals but that tactic works better face to face than through a realtor or emails.

[TP3]

Man, 20 minutes on this thread has got me thinking a lot more than all of the googling I have been doing for 2 days.
Thank you for the offer Preacher Man. I might take you up on that this week if things progress.

[texasair]

Understand that his broker represents him, not you.

He has a responsibility to treat you fairly, but all advice, tips and inside information and effort goes to the advantage of the seller, not you

[rattler03]

If its listed through an agent already, like you say it is, I would get my own agent. You're paying the 6% commission (the seller has already agreed to that in their contract), so you should have an agent that represents you and you alone.

[LWD]

I once got great advice from a real estate tycoon....he told me to never say a number. Ask the seller what their bottom price was....then say well that's not really what I can do....can you go any lower? He has 800 rentals but that tactic works better face to face than through a realtor or emails.

This works great if it works. Those familiar with the technique and not needing to sell might send you packing (at worst) or suggest you make an offer (at best).

LWD

[LWD]

If its listed through an agent already, like you say it is, I would get my own agent. You're paying the 6% commission (the seller has already agreed to that in their contract), so you should have an agent that represents you and you alone.

For sure. Your agent gets paid by the seller's agent. The seller's agent may try to discourage you from getting your own because they want the full commission, but you sound like you would really benefit from having your own.

LWD