Help, Lot Is Closing Friday!
There is a 1.9 acre lot in a neighborhood where 2500sf homes (4-5BR, 3.5 BA) sell for 350k. They say that the lot is already planned for 3 homes, (I checked zone code:R-R: Rural Residential - Permits approximately one-half-acre residential lots; subdivision lot sizes
depend on date of recordation; allows a number of nonresidential special exception uses.
Standard lot size - 20,000 sq. ft.)
I just got in touch with the sellers, they are closing on Friday, I am not sure if the offer has an escalation clause.
Are agents always open to higher offers? Can I make an offer this week or am I wasting my time?
The plan is to partner with one of 3 builders and then flip all, or hold one and rent it out.
Thanks!
Here's an update:
I spoke with selling agent. She asked about our financial credibility, FICO score, etc, to see if we were serious. I convinced her that we were (we are). She is now calling me back. It sounds like if she takes us seriously, she'll accept our offer.
I spoke with primary builder, he advised on engineering/county issues. We discussed subdivision (also making offer contingent on subdivision), home/lot sizes. We could break ground in a few months.
Can I have some input on this process from some folks who have done it?
Heres my main question, I have to get this lady an offer, can someone refer me to a form thats flexible for a lot?
Thanks.
_________________
[ Edited by Cliffrock on Date 03/01/2004 ]
Here's another update (I hope this helps someone trying to learn about this).
I decided to make an offer on a "per lot" basis (contingency). Basically, I pay x amount per lot when the county says I can build. In the meantime I get an engineer to get it subdivided ($10k cost?).
I have yet to hear any input from some experts... I would really appreciate it.
Any help at all (even if its to tell me this idea needs work), please.
[addsig]
If the houses would sell for $375K, that translates into lot with its share of improvements (street, curb, etc.) of $87,500 using a rule of thumb. Back out improvement costs and you have raw lot value. I don't know what lot width--say 150 feet? If public water & sewer, then improvements per lot could be $37-45K. If private water & sewer, then $22,500 plus cost of well & septic. So maybe lot value around $42,000 approved. Did you want to flip to builder? If so, that lot value of approx $42K is what the builder would pay for it, so your price to the seller needs to be less than $42,000.
Good that you would make your offer on a per-lot basis and fully-contingent.
Hmmm, my ignorance is really coming out here!
NancyChadwick, you raise some points I hadn't considered. The rough plan is to get >400k for each of three homes, roughly. The cost of these homes is under 250k. (total 100k cost; over 1200k profit). However, you mentioned some costs that I assumed were in the building costs. The builder quoted me costs based on this exact scenario (empty lot in middle of huge completely developed area). So I am about to offer about 81k per lot payable only down the road when I can start contruction (could easily have down payment from buyer at that point).
I will not flip to builder, I might partner with him, only if I have to. I don't think I will have to (i.e., I am not planning on it).
So the issue is "improvement costs", the lot is on a road with houses on either side, and a neighborhood behind it. I have requested water/sewer info from utility company (WSSC). It will have to be public water/sewer. Is the cost getting pipes/permits to make that happen? And should my builder assumed this is part of construction costs.
Thanks for the help! [ Edited by Cliffrock on Date 03/01/2004 ]
My improvement numbers assumed having to build a new road. If each of the prospective lots has frontage on an existing street so no new road would have to be built, then improvement costs would obviously be much less--something to prepare the site, water and sewer tap-in fees. Are the water and sewer lines in the existing street at the site?
So the builder would be charging you about $100/SF for constructing each house? You keep title, builder is just a contractor?
Would each of the lots have frontage on an existing street?
Picture a long isoceles triangle, short side 213 ft, two long sides about 680 ft.
A street along the short side and another one at skinny point.
I am going on two assumptions for right now 1-fullwater and sewer just need to be tapped from the street. 2- We can do a long "shared driveway" , fairly popular around here when suddivision happens.
We just got in touch with "developer's dream" old-fashioned experienced lending company, the construction loan for about 750k should be no problem, they work with final value, not acquisition costs, apparently. SO, I think the builder will simply be a contractor. I have been through (quite often) three of this guys homes and know two people that are satisfied customers of his. The homes are something I dream of living in someday! I am planning on more like 3000 SF, they have flexible plans they work from.
NancyChadwick, I keep thinking you're about to drop another nugget of thought on this issue. BTW, read your info source article and loved it, plus thinking like a builder is very smart. Thanks for helpingme think this through
Only thoughts at this point are make sure the municipal subdivision ordinance allows shared driveways and/or flag lots. (Wish we could draw pictures--would make it much easier to talk.) Also, you might want to consider not having the builder start construction until you have purchase contract from the end user, so you don't get stuck with a spec sitting. If anything else occurs to me, I'll throw it in.
Thanks for your kind words.