Selling house to development company

[lovemylife]

Thanks in advance for help.

My DH and I bought our house 4 years ago. We are on a half acre on a corner in the city, which is unheard of in my area. We used to have a view of the lake before the development company started to build across from us this summer. Not a big deal. Well last month a person came over from there, one of the developers, and asked if we would ever consider selling our house. To be honest, DH and I never did consider moving. We like our house and area and it is going to change a lot. Anyways, I told him that we never thought about it but if we did, I would need it worth my time and effort to sell and move. He asked if I had a general price and I told him one that was a little high, but I wanted to see what he said. He agreed that that number was okay and he would get back to me. FF to today and I had a partner of his call me and talk to me about the whole thing, explaining how they do things. Set a deal with a price, give us a non-refundable cash amount for about $1000 up front and every 6 months the same, then in about 18 months, they would probably close. Gives us plenty of time to look around. But then again, they may say they don't want it, won't know until later. Anyways, the person that called me tonight went over all of this and asked me what figure I was looking at and I told him and he said that I was way out of line and he told me he was thinking only $20,000 over what we paid, saying that a 5% growth in 4 years is good, which is probably is if I was thinking of selling. This person was a little rude to me and I felt insulted by him. I said you are coming to me, not me to you and I feel that if you want my property then I think we can come to an agreement. I am willing to come down some in my price, but I think that they definitely need to come up a lot in price, by at least $50,000. My question is, what do you guys think would be an appropriate range or if anybody has gone through this, how did you handle it?

 

[StephMK]

I am in no way knowledgeable about development deals but I would strongly suggest working with a realtor to set a price. I would imagine that a project that big will bring in big profits for the development company. I think you are right that it needs to be a price that makes it worth your while.

 

[bearzabout]

Have you thought of getting an appraisal without telling the developer?

I would also call a few agents and get an expert's advice and what it is worth.

Check zillow for recent sales in your area. I know your circumstances are different, but it would be good to know what the market has done in your area over the past 4 years.

 

[lovemylife]

When we bought this house, we got it for a really good deal, for under $90,000 for a 4 bedroom, 2 bath 1/2 acre lot on a corner with lake view. Most houses in this town for the same size go for over $175,000. My concern too was if we agree on a price and the housing market goes up in the next 1-2 years a lot, we could be even more out than we would be. I feel that it needs to have an amount higher for that contingency and that they are coming to me. On Zillow it goes shows it should be around $154,000, some others go a little less, but around $140. They are just going to tear it down to build stores or condos. We are already zoned commercial and residential so they would already have that advantage too.
I should say they tried to bully the restaurant across the street from us when they rebuilt after a fire and tried to make them design the restaurant like their future condo developments. Finally took a lawyer for them to stop harassing them.
I want to be fair but also want to come out of this with enough to pay off house and cc and put down on new place, if we chose to sell.

 

[Handbag Lady]

One MILLION dollars!

I don't deal with real estate but I have dealt with film shoots and they ALWAYS say that the price we ask is too high...when we know that their budget and shoot schedule would be totally ruined if they didn't get X address secured.

I'd also ask for a cancellation fee. If they put you through all of that and pay just a thousand every six months, uhm, no. If they cancel after two years, you get $10k. Shoot for the moon if you didn't feel like moving anyway.

You are right. They came to you, not the other way around.

And rudeness would just end the deal.

 

[sherry7]

I live in a small semi-rural town. A few years ago, a large gas station/convenience town came to town, and they bought a piece of ground of about 3 acres. I was told by a very reliable source that they paid $1 million for that piece of empty property.

 

[bcwife76]

Would you be able to have an appraisal done by your bank (the one that holds your mortgage)? That might hold the most weight.

 

[mickeymaker2003]

If you agree to that plan, you would be locking in a sale price now and forfeiting whatever value increase would happen in the meantime. Your property value could increase by more than $2,000 in a year. Plus if you want to sell sooner for some reason or decide you don't want to move, you are stuck. If you want to move and they decline to buy, you have to start over. They would hold all the cards. I would not agree to this plan.

 

[trip]

I don't think it's so much what your house is worth (since they're going to tear it down) it's about how much your lot is worth to the development company. I think you should talk to and use a real estate agent and lawyer. The development company will try to pay as little as possible.

My sil sold her house to a developer. I think she ended up with 3-4 times the value of the house, money for moving costs, and money for incidentals. Seems there were more things but can't remember. Have them deal with your agent or lawyer.

 

[marlynnp]

If you agree to that plan, you would be locking in a sale price now and forfeiting whatever value increase would happen in the meantime. Your property value could increase by more than $2,000 in a year. Plus if you want to sell sooner for some reason or decide you don't want to move, you are stuck. If you want to move and they decline to buy, you have to start over. They would hold all the cards. I would not agree to this plan.

I agree.

And will add that this sounds more like they wish to tie up your property in the event another developer comes along. Is your parcel zoned only residential or is it mixed use?

There's no way I'd be entering into any long-term contract with them.

 

[kymom99]

I would definitely enlist the help of a professional and get an airtight contract. Make sure you understand it beginning to end.

My niece made a deal with a woman to buy the cabinets from her kitchen. Someone had bought the woman's house and was going to tear it down. The kitchen was less than 10 years old, so in good condition. She believed she had salvage rights. The day before my BIL was to go in and take the cabinets, the buyer informed the lady that she couldn't have them. He said he was going to rent the house out for 6 months before demolition. She had made deals with people who were going to buy the furnace, etc. Thousands of dollars. Apparently she didn't understand her contract. Just be sure to protect yourself.

 

[lovemylife]

Thanks for all of the replies so far. I know for sure that they want the land to build on since they are on the lake side of me and across the street, by the restaurant I mentioned they were rude to. I know that they offered to buy out the neighbor behind me, but he has a small house and small lot and is elderly.
My main concern was with increase in housing value and getting stuck with an amount now that may be way low in a year or two. The guy kept saying, " but in the meantime, you will have free money." Okay a few thousand dollars isn't that much for me to enter into this instantly. My property is zoned commercial and residential, so it is of benefit to them. I don't know if he was rude to me because I was a woman or he thought that I would fall over for a few thousand dollars, non-refundable, he repeatedly told me. With their development going in, my property values will rise, probably a lot. The developments they are building are going anywhere from $500,000 to $1,000,000. If they bought my house, they would have a HUGE area on a corner that they would control. I feel like it is worth a lot to them in the future. The man kept saying that they weren't sure that they would want it later and then we would keep the money. Well, if you aren't sure, then I couldn't look for property or another house either, because what if they decided not to purchase, then we are screwed. I don't want to wait for them to say, yes now we want your house and you have 3 months to close and move or never really decide. I guess I better call a realator/lawyer. Does anybody have any idea how much a real estate lawyer would charge for this?

 

[StephMK]

Thanks for all of the replies so far. I know for sure that they want the land to build on since they are on the lake side of me and across the street, by the restaurant I mentioned they were rude to. I know that they offered to buy out the neighbor behind me, but he has a small house and small lot and is elderly.
My main concern was with increase in housing value and getting stuck with an amount now that may be way low in a year or two. The guy kept saying, " but in the meantime, you will have free money." Okay a few thousand dollars isn't that much for me to enter into this instantly. My property is zoned commercial and residential, so it is of benefit to them. I don't know if he was rude to me because I was a woman or he thought that I would fall over for a few thousand dollars, non-refundable, he repeatedly told me. With their development going in, my property values will rise, probably a lot. The developments they are building are going anywhere from $500,000 to $1,000,000. If they bought my house, they would have a HUGE area on a corner that they would control. I feel like it is worth a lot to them in the future. The man kept saying that they weren't sure that they would want it later and then we would keep the money. Well, if you aren't sure, then I couldn't look for property or another house either, because what if they decided not to purchase, then we are screwed. I don't want to wait for them to say, yes now we want your house and you have 3 months to close and move or never really decide. I guess I better call a realator/lawyer. Does anybody have any idea how much a real estate lawyer would charge for this?

No ideas on cost but it definitely sounds like they are trying to tie up your property. You hold all the cards and they are trying to pin you down before things really get interesting.

It sounds like you are sitting on a great piece of property and should get much more than the house value if you do decide to sell at some point. If you aren't sure you want to sell, I'd probably wait a year and see how things look at that point. Either way, I would guess you will find that it was a very good investment to buy it when you did.

 

[kymom99]

I'm going to add this also. My house sits on 2 lots. It is an old house in a newer, upscale neighborhood. Doing a traditional appraisal doesn't even hint at what the land itself is actually worth. We have had people knock on the door wanting to buy the extra lot. The neighbor has tried to buy half of the extra lot so that no one can squeeze a house in there. He wasn't eager to pay to take control of my property, so the talking stopped right there. You are in control here and it sounds like your property is very valuable in light of the new developments and its location. This sort of thing happens all the time. Protect yourself and your investment.

 

[steve04386]

If you are not truly interested in selling then ask for whatever you want. Of course they're going to counter with a smaller figure, but stick to your guns and play hardball. It seems that they either want your property or want to lock it up so that you couldn't sell to someone else.
Also, if you are worried about the market going up in 2 years, then ask for shorter terms, like a 6 month up front due diligence period with monthly renewals(payments) and a 30 day termination notice option for yourself after the due diligence period.
If you are going to pursue this type of transaction, then I would highly recommend reaching out to a lawyer to have them review/prepare the documents for you and/or handle the interactions with the developers, which would hopefully remove some potential headaches.
Good luck!

 

[happily single]

The bottom line is they NEED your property. I would increase the amount I intitally told them I wanted and stick to my guns.

As you stated, you had no plans on moving, so why should you inconvenience yourself? Make it worth your while. Remember, you are going to have to pack up your belongings, find a new house, change your address on everything-moving is a big hassle.

You hold all the cards in this deal. Make it worth your while!

 

[fbb]

I should say they tried to bully the restaurant across the street from us when they rebuilt after a fire

Might be time to shore up your homeowner's policy

 

[JanaDee]

The bottom line is they NEED your property. I would increase the amount I intitally told them I wanted and stick to my guns.

As you stated, you had no plans on moving, so why should you inconvenience yourself? Make it worth your while. Remember, you are going to have to pack up your belongings, find a new house, change your address on everything-moving is a big hassle.

You hold all the cards in this deal. Make it worth your while!

I was going to say the same thing. If they want it bad enough, make them pay for it, knowing whatever they pay you is peanuts compared to what they will make in future profits.

Do not enter into any long term contracts! That only ties up the property and only benefits the developer.

I'd ask for $250,000 minimum, possibly $300,00. If they were rude to me and started trying to bully me, that figure would continue to increase.

I would recommend you get some expert legal advice from someone that can guide you in what you need to do/know.

 

[Miffy]

OP: If you love your house and had no intention of moving before all this happened, why do it now? It's not like you bought your house as an investment, you live there. It sounds like you got a great deal when you bought it and that you like your neighborhood.

When you don't know what to do, when you can't decide, the simplest, easiest, most calming thing to do is to say no. From what you've said, there's absolutely no reason for you to sell your house to this developer other than, perhaps, some money. Not even a huge amount of money, just some money. Totally not worth it, imho.

BTW, if you think you're going to go through with this for whatever reason, the first thing you should do is look around at houses and neighborhoods where you'd want to move and see what the prices are. You might find that you really do want to stay where you are--or that you really don't want to stay. The next thing you should do is hire an attorney. There's no way you should even negotiate with these developers without a professional on your side. That's what they're doing. Factor the cost of the attorney into your asking price. And I agree with PPs who are suggesting you ask for a huge amount. Why not? You have nothing to lose.

 

[ktlm]

I was going to say the same thing. If they want it bad enough, make them pay for it, knowing whatever they pay you is peanuts compared to what they will make in future profits.

Do not enter into any long term contracts! That only ties up the property and only benefits the developer.

I'd ask for $250,000 minimum, possibly $300,00. If they were rude to me and started trying to bully me, that figure would continue to increase.

I would recommend you get some expert legal advice from someone that can guide you in what you need to do/know.

I 100% agree with this. It sounds to me like they are clearly trying to take advantage of you. They want to tie up your property, and they want to undervalue it and lock in a low price in case the values go up. It could be that they want to see how they do in the area they are developing before deciding whether to develop your property, but want to lock yours in at a low price just in case keep other developers from buying it especially if the values raise. It may not be that they want to develop it, it may be that they want to lock you at a low price and tie it up while they build things that make the value go up and then they can close with you and sell it to someone else at a significantly higher price.

I absolutely would shoot for a high price. It sounds like the property was worth more than you paid for it. They should not get the benefit of your luck in getting a good deal. Also, if they want it that bad, they should pay a premium for the fact that you are not interested in moving or really selling the place. If you like the home, you certainly shouldn't be bullied into selling it for its actual value. If they want it bad enough, they will pay a premium for it. Aim high and stand your ground. If you don't really want to sell it anyway, then what is the harm to you if you decline.

My Dad had a 10 acre piece of vacant property for years that developers were always sniffing around about. When developers sniffed around, he would always give a really high number and they would decline and tell him he would never get that. After he passed away, they started sniffing around again and thought they could get us to take a lower number. We declined. Ultimately we had it appraised by a very reputable appraisal company who appraised it for development purposes and we shot for something a bit above that appraisal which was significantly higher than my dad had ever quoted any of them the past. As we had paperwork to back up the value one of the developers who had been attempting to buy it accepted our price. We thought we had gotten a good deal. Shockingly, someone out there wanted it far more than them and was willing to pay them a huge premium for it. The developers that bought it from us held it for about a year and got another developer interested in it who really wanted it and wanted to develop it immediately and they wound up selling the thing to that developer for over twice what they paid us. It kind of makes me sick to think we could have had twice what we got- but we did get a fair price, we would have had to have maintained it another year (which was not cheap as the leaseholder who boarded horses there had bought a farm and left), and we would not have had the contacts they had, so I don't know if we would have ever found the other developer or they would have come to us. No property around there had ever sold for even close to the price they got for it, so there was no way to know it would sell for so much higher than its appraisal and value. It is a neighborhood of nice houses now.


So, the moral of my story is- we thought we were getting a really high price and it turned out we got a whole lot less than someone was willing to pay for it. It sounds like these people are going to really want your property unless their current development goes bad- maybe not now as they are busy in the area, but maybe next year (once they have sold what they are developing now- they will want a new area to start in). If they do, make them pay for it. Don't let them lock you in to a long term deal, sell for a premium, and don't let them put a closing out more than 90 days. If they won't meet your premium now then don't sell. If you think the property values are going to go up because of what they are building now and if you think what they are building now is going to be so successful that they are really going to want your property, then hold it and when they want it bad enough, they will pay your premium.