How to negotiate unsolicited purchase offer for my house?
October 9, 2015 11:11 AM Subscribe
I own a house that's affectionately known as a teardown but it is in a pretty good location and the land underneath, while small, is zoned for more profitable buildings. It is also located in one of the most strenuous real estate markets in the country. A real estate investor came by and made an offer to buy it for a price that's too low for me to buy elsewhere around me. How can (or should) I negotiate this?
I realize up front that this is a situation many, many people would love to be in. :)
My house is a rather old, not-particularly-special small house in Seattle. It is on a lot that is zoned for multifamily use—there's the possibility that the city will rezone it for even more dense use between now and spring—and I've always known that, given how building goes around here, I'll be the last person to live in this structure. There is some empty land adjoining my lot and a pair of real estate investors knocked on my door and asked if I would be interested in selling. Their plans are to build townhouses, so not selling would mean I'm the only single-family house left on my block and have 3-story buildings on three of my four sides (the fourth faces the arterial street).
They gave an actual number. It is about 80% above what I paid for the house a couple of years ago. Were this any other real estate market, I'd probably have said yes right then and never looked back. However, my family and I like our current location (it is very "up-and-coming," as evidenced by all of the building around me), this house was very inexpensive relative to everything else in Seattle, and the price they offered won't let me buy anything comparable or better inside the city.
My first thought is to simply calculate the price that I would like to have and tell the investors that's what I want. That number is about 50% higher than their overall offer. If they say no then I stay put and keep slowly remodeling and doing my house projects. That would be a good outcome in my mind.
On the other hand, I have a real estate agent that I used to buy this house and he navigated a somewhat-complicated transaction to get my original purchase done for a lot less money than the original seller wanted. Would it be worth the 6% (or 3%?) to ask him if he'd negotiate for me in exchange for an agent's commission?
(One last confounding variable: There's a driveway, parking, and utility easement across my lot and the neighboring lots, less than 8 years old, that was left over from the last time someone tried to do a project on them. If the investors don't have my lot but the easement is still in effect, wouldn't they have to ask me to give up the easement?)
I realize up front that this is a situation many, many people would love to be in. :)
My house is a rather old, not-particularly-special small house in Seattle. It is on a lot that is zoned for multifamily use—there's the possibility that the city will rezone it for even more dense use between now and spring—and I've always known that, given how building goes around here, I'll be the last person to live in this structure. There is some empty land adjoining my lot and a pair of real estate investors knocked on my door and asked if I would be interested in selling. Their plans are to build townhouses, so not selling would mean I'm the only single-family house left on my block and have 3-story buildings on three of my four sides (the fourth faces the arterial street).
They gave an actual number. It is about 80% above what I paid for the house a couple of years ago. Were this any other real estate market, I'd probably have said yes right then and never looked back. However, my family and I like our current location (it is very "up-and-coming," as evidenced by all of the building around me), this house was very inexpensive relative to everything else in Seattle, and the price they offered won't let me buy anything comparable or better inside the city.
My first thought is to simply calculate the price that I would like to have and tell the investors that's what I want. That number is about 50% higher than their overall offer. If they say no then I stay put and keep slowly remodeling and doing my house projects. That would be a good outcome in my mind.
On the other hand, I have a real estate agent that I used to buy this house and he navigated a somewhat-complicated transaction to get my original purchase done for a lot less money than the original seller wanted. Would it be worth the 6% (or 3%?) to ask him if he'd negotiate for me in exchange for an agent's commission?
(One last confounding variable: There's a driveway, parking, and utility easement across my lot and the neighboring lots, less than 8 years old, that was left over from the last time someone tried to do a project on them. If the investors don't have my lot but the easement is still in effect, wouldn't they have to ask me to give up the easement?)
Why on earth would you ever sell to these people? They are knocking on doors trying to low ball people and looking for a fool who will fall for them.
If there's a possibility the land will be rezoned so it will be more profitable, why wouldn't you wait? And if you want to sell, why wouldn't you do it properly and start a bidding war?
posted by crazy with stars at 11:20 AM on October 9, 2015 [36 favorites]
If there's a possibility the land will be rezoned so it will be more profitable, why wouldn't you wait? And if you want to sell, why wouldn't you do it properly and start a bidding war?
posted by crazy with stars at 11:20 AM on October 9, 2015 [36 favorites]
Look around a bit, find the price for a place you would be happy to move into (like really, actively happy -- round up), add a third or more for fees, moving costs, painting, etc. That is your minimum. Then add at least twenty percent to that and start negotiating.
If it fails, you are out nothing.
I've thought about it and it would take at least 50% over market value to get me to consider moving.
posted by jeather at 11:27 AM on October 9, 2015 [8 favorites]
If it fails, you are out nothing.
I've thought about it and it would take at least 50% over market value to get me to consider moving.
posted by jeather at 11:27 AM on October 9, 2015 [8 favorites]
Yeah, you haven't really indicated why you would even consider getting into this negotiation; do you even want to sell (and move) at all? To be clear, you can just say no and tell them to pound sand; just because someone offered to buy your house doesn't mean you owe them a drawn out discussion about the issue.
One other thing could use some clarification:
There's a driveway, parking, and utility easement across my lot and the neighboring lots, less than 8 years old, that was left over from the last time someone tried to do a project on them. If the investors don't have my lot but the easement is still in effect, wouldn't they have to ask me to give up the easement?
I am not sure if you are using easement in the technical legal sense, but formally, an easement is a legal right to access property that otherwise, but for the easement, belongs to someone else. I take it from the fact that the easement crosses not only your property but several others that it is held by a developer or something. If I am correct, then the consequence is that NO, they do not need to ask you for anything - they already have the thing, which is a right to cross your property for all of those reasons. So if they develop around you, expect all of those to be increasing issues that you won't necessarily be able to do anything about.
Or if you meant something else by easement, you should clarify.
posted by Joey Buttafoucault at 11:31 AM on October 9, 2015
One other thing could use some clarification:
There's a driveway, parking, and utility easement across my lot and the neighboring lots, less than 8 years old, that was left over from the last time someone tried to do a project on them. If the investors don't have my lot but the easement is still in effect, wouldn't they have to ask me to give up the easement?
I am not sure if you are using easement in the technical legal sense, but formally, an easement is a legal right to access property that otherwise, but for the easement, belongs to someone else. I take it from the fact that the easement crosses not only your property but several others that it is held by a developer or something. If I am correct, then the consequence is that NO, they do not need to ask you for anything - they already have the thing, which is a right to cross your property for all of those reasons. So if they develop around you, expect all of those to be increasing issues that you won't necessarily be able to do anything about.
Or if you meant something else by easement, you should clarify.
posted by Joey Buttafoucault at 11:31 AM on October 9, 2015
I wouldn't bother getting a relator involved, I'd just counter with what it would take to get me to move. In my case, that would be the price of a comparable house I want to buy + closing costs x2 + moving costs + whatever renovations I want to do on comparable house +15% or so.
posted by craven_morhead at 11:37 AM on October 9, 2015 [1 favorite]
posted by craven_morhead at 11:37 AM on October 9, 2015 [1 favorite]
And to be clear, a place you would be happy to own can and probably should be an upgrade from where you are now. Moving is a pain, so you don't want to do it for some place equivalent. Don't under sell.
posted by jeather at 11:38 AM on October 9, 2015 [2 favorites]
posted by jeather at 11:38 AM on October 9, 2015 [2 favorites]
Investors who go around knocking on doors are circling buzzards looking for tasty corpses, and I am going to guess that there is basically zero chance they have offered you full market value. They may also not be the same people who bought the properties next door -- they may be planning to wholesale your property to the people who did buy that next-door property.
If you have a real estate agent you like and trust, it is 100% worthwhile to reach out and get their opinion about your property's value in the current market. Note that your agent should be able to give you both their estimate of your property's current value as currently developed (your house), and your property's value as a redevelopment site. I'm guessing the later number will be higher.
I would also check and see if the people who approached you are the same people who own the property around you -- your agent should be able to research that, or you could check the tax and deed records online if you're handy with that.
I agree with Joey Buttafoucault on the easement -- the easement means that whoever has the easement have a right to access your land on the terms set forth. Your agent can probably look up those terms if you don't already have them.
Personally, I'd probably sell rather than be stuck with parking and utilities going through my property and three-story townhouse construction all around me. But I'd definitely want to get the top possible dollar before I did so.
posted by pie ninja at 11:39 AM on October 9, 2015 [5 favorites]
If you have a real estate agent you like and trust, it is 100% worthwhile to reach out and get their opinion about your property's value in the current market. Note that your agent should be able to give you both their estimate of your property's current value as currently developed (your house), and your property's value as a redevelopment site. I'm guessing the later number will be higher.
I would also check and see if the people who approached you are the same people who own the property around you -- your agent should be able to research that, or you could check the tax and deed records online if you're handy with that.
I agree with Joey Buttafoucault on the easement -- the easement means that whoever has the easement have a right to access your land on the terms set forth. Your agent can probably look up those terms if you don't already have them.
Personally, I'd probably sell rather than be stuck with parking and utilities going through my property and three-story townhouse construction all around me. But I'd definitely want to get the top possible dollar before I did so.
posted by pie ninja at 11:39 AM on October 9, 2015 [5 favorites]
I live in Seattle, also, and we get a few of these offers every now and again: Our house is also on land zoned for townhomes.
It's a seller's market and you should not be afraid to ask for what you want. The developers trying to buy from you will use the zoning to build two, three, four or more properties on top of your land, tripling or quadrupling their return — or more.
They can afford to pay more and so you should have absolutely no qualms asking for more. You should always look out for your interests when it comes to having a place to live.
posted by a lungful of dragon at 11:42 AM on October 9, 2015 [6 favorites]
It's a seller's market and you should not be afraid to ask for what you want. The developers trying to buy from you will use the zoning to build two, three, four or more properties on top of your land, tripling or quadrupling their return — or more.
They can afford to pay more and so you should have absolutely no qualms asking for more. You should always look out for your interests when it comes to having a place to live.
posted by a lungful of dragon at 11:42 AM on October 9, 2015 [6 favorites]
Remember: The goal of a negotiation is not to get paid what the property is worth to you: It is to find out what it is worth to them. You then sell for that amount if it is greater than what it is worth to you.
posted by Mr.Know-it-some at 11:44 AM on October 9, 2015 [16 favorites]
posted by Mr.Know-it-some at 11:44 AM on October 9, 2015 [16 favorites]
I would consider getting a paid appraisal, or asking your real estate agent to give an appraisal. That will provide better information. It may be hard to appraise because there would likely be a change of use, and because the market is volatile.
Mr. Know-it-some is correct - what's it worth to you determines whether you want to sell; what's it worth to them determines price. You did a great job of purchasing, you can probably find another okay deal. Also, the value is unlikely to go down, so there is no time pressure.
posted by theora55 at 12:17 PM on October 9, 2015
Mr. Know-it-some is correct - what's it worth to you determines whether you want to sell; what's it worth to them determines price. You did a great job of purchasing, you can probably find another okay deal. Also, the value is unlikely to go down, so there is no time pressure.
posted by theora55 at 12:17 PM on October 9, 2015
Would it be worth the 6% (or 3%?) to ask him if he'd negotiate for me in exchange for an agent's commission?
You could do this but arrange for a fixed price rather than commission.
posted by Mitheral at 12:59 PM on October 9, 2015
You could do this but arrange for a fixed price rather than commission.
posted by Mitheral at 12:59 PM on October 9, 2015
My uncle is a real estate appraiser. He makes big money on stuff like this. There's actually so much money in hot markets right now that he got is agents license so he could run the whole deal and get the most out of it.
You want to call someone like him, and have your house independently appraised. Then you want to ask that person if they'd sell right now. Ask them to show you the comps, and how they came to that conclusion. It's their job, and they'll be happy to explain it.
They can afford to pay more and so you should have absolutely no qualms asking for more.
This. Many of the companies doing this, when building a multi-family structure, will turn a profit even if your home sells a bit above market rate. Doubly so if they're knocking down multiple houses adjacent to eachother. They're incentivized to just pay you even if you're asking a bit high if they need your plot to complete a multi lot project. Definitely talk to your neighbors and see if anyone else is getting offers, and if it's from the same company.
If they're only offering "asking" in a market that's as hot as you say it is, they're not offering "market rate". See how many homes around you closed ABOVE asking. Your appraiser will be able to talk about this.
On preview, i saw you're in seattle. MeMail me if you want contact info.
posted by emptythought at 2:06 PM on October 9, 2015 [1 favorite]
You want to call someone like him, and have your house independently appraised. Then you want to ask that person if they'd sell right now. Ask them to show you the comps, and how they came to that conclusion. It's their job, and they'll be happy to explain it.
They can afford to pay more and so you should have absolutely no qualms asking for more.
This. Many of the companies doing this, when building a multi-family structure, will turn a profit even if your home sells a bit above market rate. Doubly so if they're knocking down multiple houses adjacent to eachother. They're incentivized to just pay you even if you're asking a bit high if they need your plot to complete a multi lot project. Definitely talk to your neighbors and see if anyone else is getting offers, and if it's from the same company.
If they're only offering "asking" in a market that's as hot as you say it is, they're not offering "market rate". See how many homes around you closed ABOVE asking. Your appraiser will be able to talk about this.
On preview, i saw you're in seattle. MeMail me if you want contact info.
posted by emptythought at 2:06 PM on October 9, 2015 [1 favorite]
Response by poster: Some follow-up responses, waited a while so as not to thread-sit. Thanks everyone for your input so far; I'm feeling a lot more confident.
Joey Buttafoucault: "I take it from the fact that the easement crosses not only your property but several others that it is held by a developer or something. If I am correct, then the consequence is that NO, they do not need to ask you for anything"
The easement crosses both sets of parcels, the empty ones next door (that they are also trying to buy) as well as mine and is to the benefit of both parcels. However, because of how the earlier project some years ago was going to be structured, I get a lot more benefit than they do. I "lose" a 20' parking and utility easement across the back of my lot. The neighboring lots have to give me full access to a driveway they must build (when those are developed, per the terms of the joint easement) into the parking and the 20' parking easement across the back of those lots. It also makes a two-parcel townhouse development less practical, according to my agent at the time (he was trying to soothe my concerns about the easement still being in place when I bought my house).
That's a lot of words to say that, by my understanding, that means that they'd be more likely than not to want the shared easement gone and to make it go away would require my consent. Does that sound right?
emptythought: " On preview, i saw you're in seattle. MeMail me if you want contact info."
I may just do that, thank you for the offer.
pie ninja: "If you have a real estate agent you like and trust, it is 100% worthwhile to reach out and get their opinion about your property's value in the current market. Note that your agent should be able to give you both their estimate of your property's current value as currently developed (your house), and your property's value as a redevelopment site."
The agent I used to buy this house did seem trustworthy to me. Do you have any thoughts on if/what I should offer to pay him for his time?
posted by fireoyster at 3:22 PM on October 9, 2015
Joey Buttafoucault: "I take it from the fact that the easement crosses not only your property but several others that it is held by a developer or something. If I am correct, then the consequence is that NO, they do not need to ask you for anything"
The easement crosses both sets of parcels, the empty ones next door (that they are also trying to buy) as well as mine and is to the benefit of both parcels. However, because of how the earlier project some years ago was going to be structured, I get a lot more benefit than they do. I "lose" a 20' parking and utility easement across the back of my lot. The neighboring lots have to give me full access to a driveway they must build (when those are developed, per the terms of the joint easement) into the parking and the 20' parking easement across the back of those lots. It also makes a two-parcel townhouse development less practical, according to my agent at the time (he was trying to soothe my concerns about the easement still being in place when I bought my house).
That's a lot of words to say that, by my understanding, that means that they'd be more likely than not to want the shared easement gone and to make it go away would require my consent. Does that sound right?
emptythought: " On preview, i saw you're in seattle. MeMail me if you want contact info."
I may just do that, thank you for the offer.
pie ninja: "If you have a real estate agent you like and trust, it is 100% worthwhile to reach out and get their opinion about your property's value in the current market. Note that your agent should be able to give you both their estimate of your property's current value as currently developed (your house), and your property's value as a redevelopment site."
The agent I used to buy this house did seem trustworthy to me. Do you have any thoughts on if/what I should offer to pay him for his time?
posted by fireoyster at 3:22 PM on October 9, 2015
You should pay the RE agent if you decide to put the property on the open market. Getting a ballpark from a RE agent as to what they'd pitch the price at were you to do so is not a thing you pay an agent for. In fact, it's entirely normal to get suggested selling prices from several agents before you contract with one. None of those Realtors are normally paid for that.
posted by DarlingBri at 4:38 PM on October 9, 2015 [1 favorite]
posted by DarlingBri at 4:38 PM on October 9, 2015 [1 favorite]
Sounds like the door knockers don't own the vacant blocks next door?
If that is so, I would find out who does, and contact them to see if a deal is possible whereby all of you put the whole package up for sale, for example on a square metre price. If it is a single owner, that person may be the one to give you the best price - if your block is the impediment to a development proceeding.
First though, I would seek advice as suggested by others above.
posted by GeeEmm at 7:18 PM on October 9, 2015
If that is so, I would find out who does, and contact them to see if a deal is possible whereby all of you put the whole package up for sale, for example on a square metre price. If it is a single owner, that person may be the one to give you the best price - if your block is the impediment to a development proceeding.
First though, I would seek advice as suggested by others above.
posted by GeeEmm at 7:18 PM on October 9, 2015
You need to find out what the house is worth, not just what it would take to make you sell. If you are negotiating and the property is really worth 100% more than their offer, why sell it to them for only 50% and give them a built in gain of the other 50%? Plus, as you said, a professional negotiator can get you a better deal than you can get for yourself.
posted by metahawk at 8:30 PM on October 9, 2015
posted by metahawk at 8:30 PM on October 9, 2015
I own a rental property in a sort of weird pocket of the Bay Area, where prices are relatively low but also more subject to the whims of the market, so if prices in desireable areas dip by 25%, the price of my property might plummet by 50%, and vice versa.
I get the craziest offers from speculators, all of which I ignore.
However, I am starting to seriously consider selling for various personal reasons, since I feel I can expect interest rates not to hold at these low levels for much longer, and based on information I get from a local realtor (not anyone I've ever worked with, but someone clever enough to just put me on his mailing list and who sends me a postcard every month or so with comps to remind me that the market in that area is back at pre-bubble levels).
You can easily research comparative selling prices in your area, and even speak to a realtor about this without being out of pocket should you decide not to sell at this time. Realtors make their money when a house sells; they expect to put in time with people on consultations like this without being paid directly for it, because it's a business that thrives on connections and communication.
But you should also consider, as it seems that you are, what your ultimate plans are for your family and whether selling would bring you closer to that goal or not. In my case I'm thinking about funding college for two kids within the next 5-6 years, and pondering the whims of the real estate market within that context, but what are your considerations within the next few years? Is this a long-term prospect? Do you enjoy the DIY aspect? Do you need to take schools into consideration, or proximity to work/play? Are you familiar with city planning in your neighborhood, are there upcoming projects that might help you decide whether to stay there or not, or that might affect your property value even more one way or the other?
This is all information that is out there if you look for it. A lot of it you can find yourself, some of it might be easier to grok if you can find a realtor who is a bit of a "neighborhood specialist", which almost certainly exists in bulk in a city like Seattle.
posted by padraigin at 9:17 PM on October 9, 2015
I get the craziest offers from speculators, all of which I ignore.
However, I am starting to seriously consider selling for various personal reasons, since I feel I can expect interest rates not to hold at these low levels for much longer, and based on information I get from a local realtor (not anyone I've ever worked with, but someone clever enough to just put me on his mailing list and who sends me a postcard every month or so with comps to remind me that the market in that area is back at pre-bubble levels).
You can easily research comparative selling prices in your area, and even speak to a realtor about this without being out of pocket should you decide not to sell at this time. Realtors make their money when a house sells; they expect to put in time with people on consultations like this without being paid directly for it, because it's a business that thrives on connections and communication.
But you should also consider, as it seems that you are, what your ultimate plans are for your family and whether selling would bring you closer to that goal or not. In my case I'm thinking about funding college for two kids within the next 5-6 years, and pondering the whims of the real estate market within that context, but what are your considerations within the next few years? Is this a long-term prospect? Do you enjoy the DIY aspect? Do you need to take schools into consideration, or proximity to work/play? Are you familiar with city planning in your neighborhood, are there upcoming projects that might help you decide whether to stay there or not, or that might affect your property value even more one way or the other?
This is all information that is out there if you look for it. A lot of it you can find yourself, some of it might be easier to grok if you can find a realtor who is a bit of a "neighborhood specialist", which almost certainly exists in bulk in a city like Seattle.
posted by padraigin at 9:17 PM on October 9, 2015
My best friend lives in Seattle, and tells me they are doing this in all the neighborhoods. Buying properties with original, older houses, tearing them down and putting up townhouses. It's kinda gross, but if you want to sell to them, figure out the profit they are intending to make (it's quite extraordinarily high), and factor that into your price.
(And add a 'goodbye Seattle' fee into it as well, in honor of all their lost 'hoods)
posted by Vaike at 9:42 PM on October 9, 2015 [1 favorite]
(And add a 'goodbye Seattle' fee into it as well, in honor of all their lost 'hoods)
posted by Vaike at 9:42 PM on October 9, 2015 [1 favorite]
I'm a little confused by your question. You admit that your house is a 'teardown' which to me indicates that it's not in very sellable condition- and yet you expect to get a price for it that's comparable to the sellable houses in the area? I don't think that's very realistic. Where I live, even if the kitchen alone isn't updated the sellers often have to ask significantly lower than neighboring places simply because of that. So if the entire place is a teardown, how could you possibly get enough money to buy a neighboring place from the sale?
If I were you I'd check to see what others in the surrounding area have sold their lots for. If that doesn't work it might be a good idea to have a consultation with a real-estate lawyer. A consult is usually no more than 100 bucks for an hour and they often have a good idea about how the zoning laws etc can determine what you can ask for it.
posted by manderin at 12:33 AM on October 11, 2015
If I were you I'd check to see what others in the surrounding area have sold their lots for. If that doesn't work it might be a good idea to have a consultation with a real-estate lawyer. A consult is usually no more than 100 bucks for an hour and they often have a good idea about how the zoning laws etc can determine what you can ask for it.
posted by manderin at 12:33 AM on October 11, 2015
This thread is closed to new comments.
posted by Lyn Never at 11:19 AM on October 9, 2015 [11 favorites]