You Can Lead A Horse…

Wednesday
May 19th, 2010

A couple of weeks ago, I received a phone call from a prospective seller. She owns a property that has been sitting vacant for quite some time. She has been trying to sell the property herself but to no avail. In the meantime, the city is threatening to condemn the building unless she repairs it – which she is unable/unwilling to do. So, the building is a tear-down and all she really has to sell is a vacant lot.

Listening to this story, I bluntly told her that, sadly, 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! Naturally, this did not make her happy.  She is not willing to sell the parcel for the price of vacant land.

I then asked if she had considered developing the lot: tear the existing structure down and build condos which would 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 that she wouldn’t even know where to begin or how. So I proposed perhaps she could partner with a builder. She contributes 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 began arranging meetings for her to meet the builders and explore a possible partnership.

Once the idea looked like it might actually happen, she became nervous. How was this going to work? She wanted to know if she was going to have to come up with money up front? Naturally, she had a million questions  - which was the point of the meetings: to explore the possibilities. Finally, the morning we were to meet, she called me and said,

“I don’t want to meet with any builders. I just want the builders to buy the building from me. I am willing to accept $450,000.”

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

Me: “But the lot is only worth (maybe) $150,000 – max! No one will pay you $450,000 for a building that needs to be torn down!”

Seller: “No – I don’t care. If they will pay me $450,000, then I will sell it. Otherwise, I am not interested.”

BAM! Door shut. End of conversation.

Her attitude is a mystery to me. By doing what I am proposing, she would put something like $350,000 in her pocket – after expenses and closing costs! – for a property that is worth MAYBE $150,000 (and I think that is already pushing it). In essence, my solution creates an additional $200,000 for her!

But it’s easier and simpler to live with the fantasy that your $150,000 parcel will someday bring you $450,000. I noticed yesterday that there is another realtor’s For Sale sign on the property. And what is it listed for? Yup, you guessed it: $450,000…

“All Things With Exuberance!”
mary!