You Can Lead A Horse...

Last week, I received a phone call from a prospective seller. They own a property that has been sitting vacant for quite some time. They have been trying to sell the property themselves but to no avail. In the meantime, the city is threatening to condemn the building unless they repair it - which they are unable/unwilling to do. So, the building is a tear-down and all they really have to sell is a vacant lot.

Listening to this story, I told her that her property was only worth the price of vacant land. In fact, whoever buys it will also be faced with approximately $25,000 in demolition costs - so it is worth even less! She was not happy to hear this and unwilling to sell the parcel for the price of vacant land.

I then asked if she and her family had considered developing the lot: tear the existing structure down and build condos which they could then sell. Some quick research showed that new construction condos are still selling very well in this location - even in this economy! Her reply was they wouldn't even know where or how to begin. So I proposed perhaps they could partner with a builder. They contribute the land, the builder contributes everything else. When the condos are sold, everyone gets paid back what they have contributed and then share in the profits.

She thought this sounded like a good idea. So I proceeded to put out some feelers to see if there were any builders interested in such an arrangement. Well! I had 3-4 different builders very much interested! So I arranged for the family to meet with the builders to explore a possible partnership.

Once the idea looked like it might actually happen, the family became nervous. How was this going to work? Are we going to have to come up with money? They had a million questions. Naturally - which was the point of the meeting: to explore the possibilities. Finally, she called me and said,

"We don't want to meet with any builders. We just want them to buy the building from us. We will accept $450,000."

(Now, mind you, this was a big drop in price. Previously, they wanted $650,000 for the property! Which explains why they hadn't been able to sell it themselves.)

Me: "But the lot is only worth (maybe) $150,000 - max!"

Seller: "No. If they will pay us $450,000, then we will sell it to them. Otherwise, we are not interested."

BAM! Door shut. End of conversation.

I am not even going to discuss the time and energy I put into solving this problem for them. But then that's what we do in this business. That's what we (sometimes) get paid for.

Their attitude is a mystery to me. By doing what I am proposing, they would put something like $350,000 in their pockets - after expenses and closing costs! - for a property that is worth MAYBE $150,000. In essence, my solution creates an additional $200,000 for them!

But it's easier and simpler to live with the fantasy that your $150,000 parcel will someday bring you $450,000.

"All Things With Exuberance!"
mary!