How to buy the vacant lot next door
By Richard Montgomery
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We have some property in a popular vacation area where we are building a cottage. We bought the lot six years ago. The neighbors own a lot between us they just put up for sale. We think it is best to buy it for our overall property value. Based on an appraisal, it is worth 36-40k. They purchased it four years ago for 29k. Now asking 49k. Because we own the lot next to them, we feel like they will expect us to pay more. What strategy will help us buy the vacant lot next door?
Strategy is challenging to determine in any negotiation. The many variables in the minds of each participant are often unknown. Motivation, preconceived negotiating notions, financial position, honesty, emotional status and common sense all come into play.
Circumstances to consider
The salability of the lot. Why are they selling? How well you are acquainted. The current state of the neighborhood lot market. Your motivation to acquire it. The effect of the purchase on your finances.
1. Wait for some time to pass. The risk is someone else buys it. A lack of demand favors you. If your value assessment on the lot is correct, it may sit there
2. Make an offer now for what you would be comfortable paying (sounds like under 40). The risk is you insult them (limited risk). The value is you have lost nothing if the seller does not accept. If they are selling because they need cash quickly, you may prevail.
3. Make an offer a bit higher than you want to pay. The risk is if they accept you might have been able to buy it for less. The value is you acquire the lot, or if they reject, you have lost nothing. They may even come back with a counter-offer you like.
4. Pay the asking price to eliminate any risk. Average this purchase with your initial lot price. Avoiding the risk of losing the property is more valuable to some than the extra cost.
The real estate agent is likely to be on your side and urge the seller to take whatever offer you make. It is a low commission sale. Many agents don't like to spend much time on them. They see the same comps you do and know the seller's price is high. The seller may also see that the price is high.
Agents take small commission listings because they sometimes lead to high commission transactions. No matter what you offer, be careful what you say to the real estate agent. For example, you ask the agent, "Do you think the lot may be a financial burden?" The agent translated to the seller, "They wonder if you are in financial trouble." Agents can sometimes accidentally throw fuel on the fire with an inaccurate comment to the seller.
Richard Montgomery is the author of "House Money - An Insider's Secrets to Saving Thousands When You Buy or Sell a Home." He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Find him at DearMonty.com.