Residential lot sale scenario... opinions?

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Topic Author
rossiFan
Posts: 4
Joined: Mon Mar 26, 2018 11:43 am

Residential lot sale scenario... opinions?

Post by rossiFan » Wed May 15, 2019 8:55 pm

Greetings all, this is my first thread on BH forum although I've been a lurker for awhile. Lots of good opinions on many subjects!

We're (wife & myself) doing a for-sale-by-owner on a residential lot and recently received an offer and aren't sure what to think of it.

The lot is about 12,000 sq. ft. and is in Southeast Alaska. It borders a wetlands refuge and has a tremendous view of mountains and a glacier that can never be blocked in the future because of the wetlands refuge. It's also on public utilities. The main drawback of the lot is that, because of the wetlands proximity the house would have to be on a pilings foundation. There's a house on either side of it and they're both on pilings so it's obviously workable. The pilings issue makes potential buyers uneasy because it's somewhat difficult getting a fixed estimate on the cost of the foundation. We listed it for 180K. The offer we've received (from a local person) contains a somewhat lengthy description of terms (see below). We countered with a lower price (but straight-up terms) and that was rejected. We're not in a hurry to sell this lot so no need to take desperate measures. Any opinions on this offer would be appreciated.

I am interested in a purchase arrangement for the (name redacted) property structured like this:
1. $180000 full-price offer
2. Somewhat extended close 6-12 months with earnest money/down payment deposits monthly
3. Property remains listed, unless Seller prefers my deposits non-refundable, which is ok
4. $1,909.18 Monthly earnest money deposits based upon 10yr 5% amortization
5. 45-day Buyer Inspection Period begins after contract agreement
6. Buyer deposits commence after Inspection Period
7. The duration of this contract is 6-12 months -- TBD
8. Buyer will pay all the remaining outstanding balance on the $180000 purchase price at the 6-12 month contract termination

Buyers offer is made upon the following terms:

A final remaining balance payment to be made to Seller in full on the remaining balance of the loan on or before the 12 month period.

Seller may elect one of the following:

1) If Seller would like to consider monthly deposits as non-refundable then Buyer requests that seller take the property off
the market and change the legal listing status to "pending."
2) If the Seller would like the property to remain on the market, then the monthly deposits would be refundable -- and, in the event another Buyer is willing to purchase the property, then all deposits shall be given back to the Buyer less escrow fees. Under this option, Buyer requests a 72 hour "right to perform" in the event another Buyer is procured.

During the open escrow period Buyer requests that there be no encumbrances or that Seller adversely improve the property
in anyway. Once the purchase price has been paid for in full Buyer requests that all personal property be removed from the
property.
Payments to Seller to commence after the 45 day inspection period has been satisfied.

Standard Alaska MLS forms would be used for the transaction.

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Sandtrap
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Re: Residential lot sale scenario... opinions?

Post by Sandtrap » Wed May 15, 2019 9:40 pm

There's a lot of "red flags" here. ( :shock:
Strongly suggest only take offers with "straight up" terms.
No "owner carry" in any way. The buyer can seek financing at a local bank, etc.
Regular DROA agreement with deposit.
Property goes into Escrow (have a title company handle all this).
Payment to you in full as agreed.
Title changes hands.
Done.

Keep it simple.
If you have a hard time finding a buyer, lower the price.

WildBill
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Location: San Antonio, Texas

Re: Residential lot sale scenario... opinions?

Post by WildBill » Wed May 15, 2019 10:15 pm

Howdy

Interesting offer.

My thought is that he is essentially buying an option and planning to flip the property, or maybe he is having trouble getting money for building and wants to lock it up while raising the money. Maybe trying to rezone it for something else besides a single family house, although that may be unlikely given the neighborhood.

If you make the deposits refundable you are giving him a free option. Do not do that.

If you set it up so that he is going to make non-refundable payments monthly, and loses the money if he doesn’t come up with the full payment and close by date x, what is the problem ? You guys are in no hurry, so then keep the payments and re-list it.

W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

Topic Author
rossiFan
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Re: Residential lot sale scenario... opinions?

Post by rossiFan » Thu May 16, 2019 1:18 am

Sandtrap:
Agreed on the "red flags" comment. Lots of conditions attached to this makes us a bit wary. Not having sold any properties before without a realtor we didn't expect a drawn-out scenario like this.

WildBill:
Rezoning is unlikely as there is a "loose" HOA with no annual dues but they do have a covenant that lays out restrictions on the the properties.

Also, we definitely wouldn't allow the deposits to be refundable. It just sounds strange to us that this person would be willing to toss $1900 a month at something he might not end up buying.

The good thing is that we're not in a hurry to offload this property so we have time on our side. Maybe if we hold out they will come around to a straight-up purchase.

Thanks for the replies.

WildBill
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Location: San Antonio, Texas

Re: Residential lot sale scenario... opinions?

Post by WildBill » Thu May 16, 2019 1:39 am

rossiFan wrote:
Thu May 16, 2019 1:18 am
Sandtrap:
Agreed on the "red flags" comment. Lots of conditions attached to this makes us a bit wary. Not having sold any properties before without a realtor we didn't expect a drawn-out scenario like this.

WildBill:
Rezoning is unlikely as there is a "loose" HOA with no annual dues but they do have a covenant that lays out restrictions on the the properties.

Also, we definitely wouldn't allow the deposits to be refundable. It just sounds strange to us that this person would be willing to toss $1900 a month at something he might not end up buying.

The good thing is that we're not in a hurry to offload this property so we have time on our side. Maybe if we hold out they will come around to a straight-up purchase.

Thanks for the replies.

Howdy

I agree and think it is best to wait on a straight buy. Offer sounds weird. I am curious on what would prompt such an offer. If you find out let us know.

W B


W B
"Through chances various, through all vicissitudes, we make our way." Virgil, The Aeneid

WhyNotUs
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Re: Residential lot sale scenario... opinions?

Post by WhyNotUs » Thu May 16, 2019 6:51 am

I don't know your market but in many places selling a lot is not all that easy. Most people like to buy houses, especially at $180k. Unless you are getting lots of interest, it might be worth trying to sort this out. In an active market, adjusting price can lead to results but with specialty property it is more about finding someone who would be interested in that type of situation. If I was buying in the area that you described, I would would have lots of due diligence to do about wetlands delineation, water table levels, soils, etc.

There is a big difference between 6 and 12 months. It would be reasonable to counter with 6 and see what happens. Maybe that will encourage them to explain what they need the time for.

A counter might be:
Full price
Immediate $3k refundable deposit in escrow
30 days Due Diligence, six months to closing
$1900 non refundable to escrow on day 31 and every 30 days thereafter
Cash at closing

That gives them time to sort out whatever they need to do but does not tie up your property for a year.
I own the next hot stock- VTSAX

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FlyAF
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Re: Residential lot sale scenario... opinions?

Post by FlyAF » Thu May 16, 2019 9:41 am

I'd be all over that (non-refundable option) offer. I don't see any downside whatsoever. Buyer obviously needs a little time to get the funds together and is willing to pay handsomely for that time. The absolute worst case scenario is that he can't get it together and you pocket 2 grand a month while he tries. You're in no hurry to sell, so why not?

delamer
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Re: Residential lot sale scenario... opinions?

Post by delamer » Thu May 16, 2019 11:16 am

Do you have any way to determine if the buyer has the money to buy the lot?

I would consult a real estate attorney if you are considering accepting this.

StealthRabbit
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Re: Residential lot sale scenario... opinions?

Post by StealthRabbit » Thu May 16, 2019 11:41 am

Due to the 'pier' / piling construction requirements, quite extensive and time consuming due diligence is required for buyer.

Give them that latitude (at their expense).

Offer seems quite fair for bare lot. (not knowing your market)
Go for the non-refundable option if you have time.
Keep it FSBO during due diligence, with this buyer in first position. (Motivation for them to complete the transaction in a timely manner)

umfan11244
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Location: Georgia

Re: Residential lot sale scenario... opinions?

Post by umfan11244 » Thu May 16, 2019 12:44 pm

FlyAF wrote:
Thu May 16, 2019 9:41 am
I'd be all over that (non-refundable option) offer. I don't see any downside whatsoever. Buyer obviously needs a little time to get the funds together and is willing to pay handsomely for that time. The absolute worst case scenario is that he can't get it together and you pocket 2 grand a month while he tries. You're in no hurry to sell, so why not?
I’m with you 100%. Land sales are tricky, and this one has a ton of upside for you (provided your attorney approves of the terms). This isn’t all that unusual compared to what I’ve seen buying and selling land.

Topic Author
rossiFan
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Re: Residential lot sale scenario... opinions?

Post by rossiFan » Fri May 17, 2019 9:03 pm

Appreciate all the viewpoints.

We've decided to move ahead with his offer over a 6-month period with option to extend. The prospective buyer will provide a more formal document which we'll run by a local attorney with real estate experience.

Hard to pass up $2k a month just for not listing the property. Especially since we're not in a hurry to unload it.

umfan11244
Posts: 54
Joined: Sat Feb 09, 2019 11:06 am
Location: Georgia

Re: Residential lot sale scenario... opinions?

Post by umfan11244 » Fri May 17, 2019 9:08 pm

Good luck! Please let us know how this works out.

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