Home value when selling to a developer

[farmkid]

I live in the country, not far out of town, surrounded by fields. When I moved into my house almost a dozen years ago, I was informed that the 50 acre lot behind and to the side of me was for sale (and had been for a few years) for commercial development. We knew at the time that at some point in the future, someone would come along and buy it and they would need our property as well. Well, our neighbor stopped by the other day and told us that he was on the verge of signing papers to sell it and that the developer would be coming to talk to us as well. It sounds like they're buying about 100 acres to put in high density housing. The road needs to be moved, and they plan to donate my property to the city/county for that. As much as I hate to see my house torn down after all the work I've put into it and my property over the years, I've known it was coming and I think I'm okay with it.

My question is, though, how does the fact that they need my property change the value? We have no desire to move and were just starting to look for an architect to help design an addition I was going to build on next year. We've made good headway on our mortgage and I'm not excited about starting that over. My kids would likely have to change schools. There are rarely any rural homes available where I live, so we will likely end up losing our rural lifestyle and be forced to move into a neighborhood. I don't feel like it would be out of line to expect a premium for the disruption it causes to our lives, but is this reasonable?

 

[bud16415]

My nephew had about a half acre lot with a 3 car garage he turned into a house of sorts and then we built a small pole barn next to the garage house. It was a nasty looking deal and I wouldn’t have gave him more than what the property was worth for the whole thing. He did make it fairly nice on the inside.



Along comes this rich guy buying up the farm next to my nephew and then one by one he was buying the Lake front properties on Lake Erie on the other side and pretty soon he owned this big square with my nephews place in the one corner. Sure enough he showed up to talk to my nephew and my nephew was ready for him. He asked about buying it and Neph gave him a number IMO 4 times what it was worth. The guy laughed and said he wasn’t made out of money and countered with a number about 3 times. Neph asked what he was going to do with the house and that he would need at least a year to build a new house. The guy said he would level it and he would give him a year to get out and he could take anything he wanted out of the garage house but he wanted the pole barn to stay. He paid up front with a contract that agreed to all that and Nepf bought about 7 acres out in the county and we built him a really nice house with the money and he ripped the kitchen out and put in the new place along with some of the bathroom as well reused doors and such.



So for him it worked out great.



On the other hand when the casino moved in there was one ugly falling down place they wanted all most next to the grand entrance and the people asked a fortune for it and the casino built right around it and left it there making it even more worthless than it was as who wants a busy parking lot on 3 sides of them.

So I guess the answer is it depends. My advice is work with them and know what is the fair price in your mind and make sure you are made whole and then some. These big outfits are pros at getting what they want and it might not hurt to show up with your lawyer. If you know they will tear your place down maybe deal with salvaging what you want or could sell etc. The time to make a deal is before the city comes in and says we are just taking it here is what we will give you.

PS

Here is the really sad part the guy that bought Neph’s place cleaned it all up tore down a dozen lake cottages and was planning to build this mansion and his wife said it was too far out of town where all her friends live. We are talking about 5 miles.

 

[Flyover]

So I guess the answer is it depends. My advice is work with them and know what is the fair price in your mind and make sure you are made whole and then some. These big outfits are pros at getting what they want and it might not hurt to show up with your lawyer. If you know they will tear your place down maybe deal with salvaging what you want or could sell etc. The time to make a deal is before the city comes in and says we are just taking it here is what we will give you.

+1 Pretty much this would be my advice too.

 

[farmkid]

Thanks for the replies so far. I'm not generally a greedy person, and I don't want to take advantage of anyone. At the same time, though, I don't want to be taken advantage of, either. I really have no idea what my property is worth in this situation, and how much (if any at all) the specifics change the value from the standard market value. Your comments have been helpful. I hadn't really considered a real estate lawyer, but I'll certainly give that some thought.

 

[oldognewtrick]

Contact a real estate person and ask them a fair market value to list it, they'll be happy to help cause they will want to be involved in your next purchase.

 

[Steve123]

Google "real estate appraisers name-of-my-town". There are plenty of outfits that do this full time.

 

[bud16415]

Something is only worth what someone else is willing to pay. I agree it’s a good idea if you can’t figure out on your own what something is worth under normal times. This is a unique situation though the OPs house is not being willingly sold and it could well be worth more than if it was on the other side of the street. There is a desire to buy and little desire to sell. That should be a factor and a hard one to put a number on.



It is good he is thinking about this in anticipation and the people doing the buying are pros at getting something for the lowest amount they can.

My house is not for sale but if someone pulled in the driveway right now and offered enough it might be. I’m sure it would take quite a bit more than fair market value. 10% over wouldn’t do it. 50% over might.

 

[bud16415]

Thanks for the replies so far. I'm not generally a greedy person, and I don't want to take advantage of anyone. At the same time, though, I don't want to be taken advantage of, either. I really have no idea what my property is worth in this situation, and how much (if any at all) the specifics change the value from the standard market value. Your comments have been helpful. I hadn't really considered a real estate lawyer, but I'll certainly give that some thought.

I agree but there are times when being greedy is more than ok, and IMO this is one such time. Trust me it would be impossible to take advantage of the people that want your place. They should have no impact on what you do and your family first should have everything to do with it.

 

[Bob Reynolds]

You have a number of replies that have given you great advice. Another option is to have the developer build you a new home in the neighborhood that he is developing. Sometimes that works out well for both parties because you can get a new home just like you want it and the developer gets to establish great comps while he sells the first home in the neighborhood. The financial people like this.

 

[farmkid]

I agree but there are times when being greedy is more than ok, and IMO this is one such time. Trust me it would be impossible to take advantage of the people that want your place. They should have no impact on what you do and your family first should have everything to do with it.

You make a good point. I'm someone who is always careful not to take advantage of others, sometimes to a fault. Thanks for pointing out that I can't take advantage of the developer in this case. Thinking about it objectively, it's going to be all I can do to not get taken advantage of.

 

[farmkid]

You have a number of replies that have given you great advice. Another option is to have the developer build you a new home in the neighborhood that he is developing. Sometimes that works out well for both parties because you can get a new home just like you want it and the developer gets to establish great comps while he sells the first home in the neighborhood. The financial people like this.

I briefly thought about this, but it's not really a good option for me in this case. They're going to be putting in high density housing. I'm not sure if that means apartments and condos or small homes on small lots, but either way, that's not appropriate for my family. As high density housing, they're not building anything that will be worth anywhere near what they're going to be paying me for my home. Also, this is a rural area; I'm surrounded by fields. I have a fantastic view out my back door of the whole south end of my valley (surrounded by mountains). That's something people pay a premium for and something I value. I really like my space and my view. There won't be anything like that in the new development.

 

[Bob Reynolds]

I briefly thought about this, but it's not really a good option for me in this case. They're going to be putting in high density housing. I'm not sure if that means apartments and condos or small homes on small lots, but either way, that's not appropriate for my family. As high density housing, they're not building anything that will be worth anywhere near what they're going to be paying me for my home. Also, this is a rural area; I'm surrounded by fields. I have a fantastic view out my back door of the whole south end of my valley (surrounded by mountains). That's something people pay a premium for and something I value. I really like my space and my view. There won't be anything like that in the new development.

I would not write this off until you have all of the information. High Density housing can mean one house per 1/4 or 1/2 acre. Of it can mean 8 multifamily units on a small lot. A suburban neighborhood can be considered a high density subdivision with homes on 1/4 acre lots that are worth a million dollars each. It also could be a neighborhood with 6 homes per acre each worth $200,000.

It's been my experience, working with a developer, that the new homes being built usually greatly exceed the cost of the homes being replaced.

Now whether or not you like the new homes better than the old home is another story.

Zoning for homes is based on water and sewer availability. If you have water and/or sewer then the homes can be built on smaller lots since you don't have to allow for a well and septic field.

If there is no water and sewer it's going to take a minimum of 1 acre per lot (sometimes more--but never less) if the land perks satisfactory.

 

[Sparky617]

I would not write this off until you have all of the information. High Density housing can mean one house per 1/4 or 1/2 acre. Of it can mean 8 multifamily units on a small lot. A suburban neighborhood can be considered a high density subdivision with homes on 1/4 acre lots that are worth a million dollars each. It also could be a neighborhood with 6 homes per acre each worth $200,000.

It's been my experience, working with a developer, that the new homes being built usually greatly exceed the cost of the homes being replaced.

Now whether or not you like the new homes better than the old home is another story.

Zoning for homes is based on water and sewer availability. If you have water and/or sewer then the homes can be built on smaller lots since you don't have to allow for a well and septic field.

If there is no water and sewer it's going to take a minimum of 1 acre per lot (sometimes more--but never less) if the land perks satisfactory.

When you start by tearing down a house the developer has to build more expensive homes on the property. He has to make money on the deal or it isn't worth doing. Here properties in Downtown Cary are getting snatched up and replaced by homes that are 3x-4x the price of what was there. If they can assemble several sites together they'll get them rezoned to allow more density. A lot of the older homes were modest homes of around 1000 square feet 1.5 baths and 3 BR on 1/2 acre lots. They'll replace them with 3000+ square foot homes on a .2 acre lot.

 

[farmkid]

When you start by tearing down a house the developer has to build more expensive homes on the property. He has to make money on the deal or it isn't worth doing. Here properties in Downtown Cary are getting snatched up and replaced by homes that are 3x-4x the price of what was there. If they can assemble several sites together they'll get them rezoned to allow more density. A lot of the older homes were modest homes of around 1000 square feet 1.5 baths and 3 BR on 1/2 acre lots. They'll replace them with 3000+ square foot homes on a .2 acre lot.

In this case, it's not replacing homes with more valuable ones, it's building a new development on farmland. My house (and my 3 neighbors) sits on the edge of the development and is in the way. Part of the project is to move the road to solve some other issues that the local powers have been trying to solve for the past 15 years, and the new path for the road goes right through my house.

 

[Sparky617]

In this case, it's not replacing homes with more valuable ones, it's building a new development on farmland. My house (and my 3 neighbors) sits on the edge of the development and is in the way. Part of the project is to move the road to solve some other issues that the local powers have been trying to solve for the past 15 years, and the new path for the road goes right through my house.

Given your location your house is pretty valuable to the developer and apparently the town. They value is higher than just the land it occupies though that is all they really want. They need to make you a fair market value offer for the house. Getting comps and an appraisal on the house would be a great start. It should sell at or above the comps to your house.

Years ago our church in Northern VA sat on a parcel of land with road access to a busy main highway. Another church owned some land that fronted the highway but couldn't get access to the highway. Our church was looking to relocate and our property became very valuable to the other church because it gave them something they lacked, road access to their property. You're sitting in a similar situation.