Attempting to Buy Property That Isn't For Sale- How To Approach?
January 18, 2016 11:21 AM Subscribe
I spotted a cool piece of property out on a drive today. It looks to be a building that was originally a single story commercial building that was built in the 1920's in the middle of what is currently a residential neighborhood. The building is abandoned and uninhabitable currently and the windows are all boarded up. The neighborhood is transitional at best- The average home estimate is about $70,000 in city where the mean home price is more like $200,000. It is owned by a guy who is a partner in a design firm, but he has owned the property since 1996 and apparently has not done anything with it so far. The city tax office values the property at $15,000.
I think this guy is probably seeing what I see- that this is an architecturally nifty if run down property. The design firm he is a partner in does mainly high end restaurants and shops and a little residential. This neighborhood is quite a ways away from being high end. Is it worth approaching him to see if he would be interested in selling it? What would be the best way to do so? One of my grandparents was good friends with one of his now deceased parents or grandparents. Would it be appropriate to try to use a connection like that?
I think this guy is probably seeing what I see- that this is an architecturally nifty if run down property. The design firm he is a partner in does mainly high end restaurants and shops and a little residential. This neighborhood is quite a ways away from being high end. Is it worth approaching him to see if he would be interested in selling it? What would be the best way to do so? One of my grandparents was good friends with one of his now deceased parents or grandparents. Would it be appropriate to try to use a connection like that?
Yeah, you're going to want either a lawyer or a commercial real estate person. You might want to see how the property is currently zoned. If the area is currently residential, the property might be in a zoning limbo, you can't convert it to residential, but it can't be commercial. It might be that the building would have to be torn down which is why your buddy at the design firm hasn't done anything with it.
The other thing is that $15,000 is for taxes only, it has NO bearing on what the property is actually worth. You're going to want an appraisal for that, mostly for your own edification and as a basis for making your offer (and getting your financing--if needed.)
posted by Ruthless Bunny at 11:39 AM on January 18, 2016 [7 favorites]
The other thing is that $15,000 is for taxes only, it has NO bearing on what the property is actually worth. You're going to want an appraisal for that, mostly for your own edification and as a basis for making your offer (and getting your financing--if needed.)
posted by Ruthless Bunny at 11:39 AM on January 18, 2016 [7 favorites]
The exact kind of professional you would want to get involved in this depends on where the property is located - in some states real estate transactions all involve lawyers, in others (such as Texas, where I live) lawyers are almost never involved unless it's a multi-million dollar commercial transaction.
But that question is getting ahead of the main issue - how to determine if the owner is willing to sell. The simplest answer is: get in touch with the owner. This can be a phone call, certified mail, or whatever, but the information you'd want to get across to the owner is:
1. I am interested in purchasing your property.
2. I am serious and have the money to do this, so I'm not wasting your time.
3. The purchase price would be FMV (fair market value) - if you're interested, once I get an appraisal I'll be happy to share a copy of it with you.
4. I realize I just hit you with this out of the blue, so take some time to think about it. Here's how you can contact me.
I wouldn't bring up the personal connection. It's tenuous and really not relevant.
posted by mrbeebz at 12:05 PM on January 18, 2016 [1 favorite]
But that question is getting ahead of the main issue - how to determine if the owner is willing to sell. The simplest answer is: get in touch with the owner. This can be a phone call, certified mail, or whatever, but the information you'd want to get across to the owner is:
1. I am interested in purchasing your property.
2. I am serious and have the money to do this, so I'm not wasting your time.
3. The purchase price would be FMV (fair market value) - if you're interested, once I get an appraisal I'll be happy to share a copy of it with you.
4. I realize I just hit you with this out of the blue, so take some time to think about it. Here's how you can contact me.
I wouldn't bring up the personal connection. It's tenuous and really not relevant.
posted by mrbeebz at 12:05 PM on January 18, 2016 [1 favorite]
Just to be clear, are you willing to pay $70,000- 200,000 k or what ever a fair market value is for it and not the $15k that is used for tax purposes?
posted by saradarlin at 12:09 PM on January 18, 2016 [1 favorite]
posted by saradarlin at 12:09 PM on January 18, 2016 [1 favorite]
Yeah, where I live tax value of residential properties is 1/3 of fair market value. It has to do with how they equalize land values for property tax purposes when looking at residential, industrial, commercial, and agricultural properties; it has little to do with the actual market value of the property, so ignore that number unless you're very familiar with the conversion formulas used local to you, as well as the incentives that might reduce taxable value.
posted by Eyebrows McGee at 12:22 PM on January 18, 2016
posted by Eyebrows McGee at 12:22 PM on January 18, 2016
Any long-standing owner-occupied neighbors? You can ask them if there is more to know of the history of the place.
Also, are you interested in the structure, or the structure and the site? As structures can be moved, to explore another option. Yes, I used to read This Old House magazine, why do you ask? ;)
posted by childofTethys at 12:50 PM on January 18, 2016 [1 favorite]
Also, are you interested in the structure, or the structure and the site? As structures can be moved, to explore another option. Yes, I used to read This Old House magazine, why do you ask? ;)
posted by childofTethys at 12:50 PM on January 18, 2016 [1 favorite]
Consider you may need to pay a premium on "fair market value" to get them interested in selling when it is not currently listed. In theory they could just list and sell for what the market will bear at their leisure.
posted by TheAdamist at 1:02 PM on January 18, 2016
posted by TheAdamist at 1:02 PM on January 18, 2016
Yeah, where I live tax value of residential properties is 1/3 of fair market value...
Mine too, but "fair market value" is defined as "value of land + value of improvements", where "improvements" are the building itself.
So if the city is marking $15K as the value of the parcel, it sure looks like the city considers the building worthless. I'm seconding the idea that the property is in zoning limbo (or perhaps condemned) and needs to be torn down.
posted by JoeZydeco at 1:12 PM on January 18, 2016
Mine too, but "fair market value" is defined as "value of land + value of improvements", where "improvements" are the building itself.
So if the city is marking $15K as the value of the parcel, it sure looks like the city considers the building worthless. I'm seconding the idea that the property is in zoning limbo (or perhaps condemned) and needs to be torn down.
posted by JoeZydeco at 1:12 PM on January 18, 2016
Do you have any information about how he acquired it? I.e., did he purchase it from a previous owner, or did he possibly inherit it? You could learn a lot about his intentions from that info: If he went out looking for something and bought this, it's because he sees something in it. If it just fell into his lap, he might not even want it.
Also, is the neighborhood a candidate for gentrification? What about 20 years ago? My guess is that he bought it cheaply in hopes that the property value would rise and he could sell it for a profit. Maybe the neighborhood didn't gentrify like he expected.
Either way, I don't think there's much harm in shooting him a quick, informal note asking if he's interested in selling. If he's not, you don't waste time with a lawyer. If he is, then you get more formal.
posted by kevinbelt at 1:16 PM on January 18, 2016 [3 favorites]
Also, is the neighborhood a candidate for gentrification? What about 20 years ago? My guess is that he bought it cheaply in hopes that the property value would rise and he could sell it for a profit. Maybe the neighborhood didn't gentrify like he expected.
Either way, I don't think there's much harm in shooting him a quick, informal note asking if he's interested in selling. If he's not, you don't waste time with a lawyer. If he is, then you get more formal.
posted by kevinbelt at 1:16 PM on January 18, 2016 [3 favorites]
Because it is in the middle of an otherwise residential area, and probably a long-standing stable one where many people have lived for decades, I would be willing to bet that whatever he wanted to do with it, the neighborhood voted it down, and so he left it to rot. I used to live a block away from a vacant rehab clinic that sat rotting for well over a decade for exactly those reasons.
In any case, I would suggest approaching him personally first, and if he's interested in selling, then engage professionals to sort out the details. And as you make your approach, realize that he probably gets form letters and cold calls from bottom-feeding real estate "investors" every week or two, and throws them right in the trash. Make yourself stand out from those folks in some way, and he might take you seriously.
And don't expect him to let it go for a loss or for what the tax rolls say it is worth. If he wanted to do that, he could do that any day of the week. He's (presumably) continued paying taxes on it for all these years for a reason. Respect that, express your genuine appreciation for the building, and make a fair offer, and he just may bite.
If not, set up an alert on Trulia or something so that you'll get an email if / when he eventually decides to sell on his own.
Good luck!
posted by spilon at 1:48 PM on January 18, 2016
In any case, I would suggest approaching him personally first, and if he's interested in selling, then engage professionals to sort out the details. And as you make your approach, realize that he probably gets form letters and cold calls from bottom-feeding real estate "investors" every week or two, and throws them right in the trash. Make yourself stand out from those folks in some way, and he might take you seriously.
And don't expect him to let it go for a loss or for what the tax rolls say it is worth. If he wanted to do that, he could do that any day of the week. He's (presumably) continued paying taxes on it for all these years for a reason. Respect that, express your genuine appreciation for the building, and make a fair offer, and he just may bite.
If not, set up an alert on Trulia or something so that you'll get an email if / when he eventually decides to sell on his own.
Good luck!
posted by spilon at 1:48 PM on January 18, 2016
Did you check the public records yet to see if there is a lien on the property, or anything that would give you the idea that he owes more on the house than it's worth? If so, you can offer to do a short sale, or at least make a justifiable below-market value offer on the house. You can find this information by doing an address search on your county assessor's website or in your county's property records.
Some cities also have laws about abandoned properties, because they bring down the value of the homes around them. Maybe check and see if this applies in this case -- if there is anything on the books about a remediation notice, or if the planning committee for the area is planning on issuing something like that.
I'm not say you should try to force his hand, but these things are good bargaining chips to bring to a negotiation. Also to consider -- is there something really wrong with the house that it isn't up to code, and fixing it would entail more time or money than you're willing to commit?
Once you know a bit more about the property, its past, and potential future, that would be a good point to shoot him a quick email to gauge his interest.
posted by ananci at 3:15 PM on January 18, 2016
Some cities also have laws about abandoned properties, because they bring down the value of the homes around them. Maybe check and see if this applies in this case -- if there is anything on the books about a remediation notice, or if the planning committee for the area is planning on issuing something like that.
I'm not say you should try to force his hand, but these things are good bargaining chips to bring to a negotiation. Also to consider -- is there something really wrong with the house that it isn't up to code, and fixing it would entail more time or money than you're willing to commit?
Once you know a bit more about the property, its past, and potential future, that would be a good point to shoot him a quick email to gauge his interest.
posted by ananci at 3:15 PM on January 18, 2016
Response by poster: I found out some more information. The land + structure values of the surrounding land are on average $55,000 on Zillow, but these are habitable structures. The land only plots around the property are valued (on Zillow at least) at around $13,000. I don't see any liens and the owner has kept up with the taxes. When he bought the land (he did not just inherit it) it was worth $23000 according to the tax rolls, but has been $15,000 for years. Do you think a fair offer would include the amount he has paid in taxes over the years plus what Zillow says its worth? Or perhaps he should name his price?
posted by Pablito at 4:16 PM on January 18, 2016
posted by Pablito at 4:16 PM on January 18, 2016
Response by poster: ps. The building is zoned currently as single family residential.
posted by Pablito at 4:29 PM on January 18, 2016
posted by Pablito at 4:29 PM on January 18, 2016
Don't make an offer until you have more information. If the property is condemned or something, you might be throwing your money away. Do your due diligence before making anything official.
posted by kevinbelt at 4:31 PM on January 18, 2016 [1 favorite]
posted by kevinbelt at 4:31 PM on January 18, 2016 [1 favorite]
Just ask the owner if he is interested in selling at market price. You don't need to do anything more than that. Either he might be, in which case you can dive into the details, or he isn't. Don't waste your time speculating about the value or contacting a lawyer. Just ask.
posted by ssg at 5:49 PM on January 18, 2016 [3 favorites]
posted by ssg at 5:49 PM on January 18, 2016 [3 favorites]
Depending on the carrying costs of the property, and if the owners work for a design firm they can recognize future potential too.
posted by TheAdamist at 5:52 PM on January 18, 2016 [1 favorite]
posted by TheAdamist at 5:52 PM on January 18, 2016 [1 favorite]
Assume the owner knows as much about this property as you are capable of discovering through research. He pays the taxes and extracts no rents to keep its valuation at the current level because he is sitting on an appreciating asset. As an appreciating asset it has an internal rate of return, the current owner knows what that amount it.
You will not be the first person to have contacted him about this property.
You can only ask if he's interested in selling, you do not have to make a valuation until after the desire to sell is stated. If he is a willing seller then you can determine how much it is worth to buy out this "bond" and when you get a RE Lawyer to work out the details.
posted by ptm at 9:30 PM on January 18, 2016
You will not be the first person to have contacted him about this property.
You can only ask if he's interested in selling, you do not have to make a valuation until after the desire to sell is stated. If he is a willing seller then you can determine how much it is worth to buy out this "bond" and when you get a RE Lawyer to work out the details.
posted by ptm at 9:30 PM on January 18, 2016
This thread is closed to new comments.
posted by furnace.heart at 11:33 AM on January 18, 2016 [3 favorites]