Agreement To Purchase And Sell Lots Or Vacant Land: Fill & Download for Free

original story by Benjamin N. (Woody) Woodson, CLU,I entered the manager’s office of my neighborhood bank and made this proposal:“Mr. Bank Manager, there is a piece of vacant land in my area that I’m interested in buying. It is well-suited, the town is developing in its direction, and I am virtually certain that its value will rise. I’ve thought the matter out carefully from every angle and I’ve come to the conclusion that the land would be a very good buy.”“There are several reasons why I prefer the prospective capital gains of a vacant lot to the current cash income I could have by buying another type of property, such as an apartment building.”“For example, I don’t particularly need a supplementary income at the moment, because these are the best earning years of my life.”“Also, the extra income that I would receive from income-producing property would, in any case, be cut considerably by the income tax I would have to pay.”“For these reasons, I think that the purchase of this land is a good-buy – provided I can be sure that its value will increase over the years, enough to represent a good return on the investment I make.”“Since I don’t want to lose money on this enterprise, I’d like to make an agreement with you and your bank that will protect me financially and give me security and peace of mind.”“The purchase price of the land is $28,000. If I buy it at that price, I want to have a written guarantee from your bank to protect me on several points.”Specifically: “I want your guarantee that the property will be worth $100,000 in 35 years (at which time I’ll be age 65) and that the bank will buy it from me at that price.”“I’m prepared to accept a reasonable shrinkage in its immediate value if I decide to sell within the next few years; such shrinkage is to be expected in the case of a long-term investment such as this.""However, I want – this early-sale clause notwithstanding – the guarantee that, each year, the land will have a market value proportionate to the $100,000 it will be worth in 35 years, and that the bank will buy it back from me at that value at any time I wish.”“In the event of my death, whenever this occurs (in three days, three months, or three years), I want your guarantee that the bank will pay to my heirs the full $100,000 that the land will be worth in 35 years.”“I want your bank (in the event of my death) to absorb any capital gains tax that would be chargeable, so that my heirs will receive the $100,000 without paying any income tax.”“I want the bank to consent to be trustee and to administer (without charge) the proceeds from the sale of this land, either for my heirs in the event of my death or for myself if I so desire, and I want the bank to guarantee the principal and interest.”“I want the bank to absorb maintenance costs and any taxes that could be levied against the land during the years I am the owner.”“I want the bank to give me the privilege of buying this lot in installments over a period of 20 years, if I should decide to do so, rather than paying the $28,000 in cash. In this way, I would make 20 level annual payments at about 6 percent interest, so that each annual payment would be about $2,200.”“Finally, in the event of my death before the end of the 20-year period, I want the bank to cancel the remaining payments and deliver the $100,000 ultimate value guaranteed by the bank to my heirs.”“Mr. Manager, if the bank accepts these conditions, I will buy that piece of land. What do you think?”The bank manager laughed. Then he told me that he didn’t think a financial institution could comply with my wishes under such conditions. Yet, as you probably guessed by now, all I did was describe a $100,000 permanent life insurance policy. It is a policy that can be purchased with a single premium or over a 20 year period. Life insurance is one of the best contracts ever conceived.

Before answering your question, it’s important to ask ourselves a few other questions first:What are the options available?What are the pros and cons of each option?How to choose the right one?In another question I talked about the different types of return a Real Estate Investor might be focusing on. I mentioned Capital Gain, Cashflow, or steady growth through a mix of the two. Now let’s drill a little deeper into that concept and discuss in general the different ways someone might invest in real estate.The Best WayThe first thing is I am not going to tell you what the best way is. Simply because the best way for me and the best way for you will be different, based on the markets we’re exposed to, our individual equity levels, and expertise.Instead we will talk about the different types of investment and what the pros and cons are for each. Hopefully then you will be equipped to make a decision around what’s best for you. It will be a shallow dive into each topic, and you can investigate each in more detail by yourself and keep an eye on my future answers here on Quora.Rental PropertiesWe’ll start with the straight-forward stuff, and gradually get more complicated.The fundamental unit of property investment is buying rental properties. But even that can be opened up into a number of different categories for the different types of properties you can purchase – residential, commercial, industrial etc. We will try to break them down and keep it simple.Residential Properties – The loans for these properties tend to be at reasonable rates, which makes the investment affordable. Also, the asset is recognizable. You don’t need to be a property valuer to understand whether it’s a good purchase or not. It’s familiar. They also represent a solid long term investment due to the general trend for residential property to appreciate in value.The leases tend to be short term, however which is a threat to cashflow, and in general these investments are not cashflow positive. It’s great if you can get it there, but generally these are long term, high touch investments. Tenants are high maintenance. They break things, and expect you to fix them, and if they lose their job, there are material legal challenges in evicting them, not to mention the risk of malicious damage if you do. The real payout comes at the end of the investment when you sell the asset and realise the capital gain.Commercial Properties: Commercial property loans are more expensive, both in rates and fees. The general investor is not going to be as familiar with the property, so they may need some expert advice to determine if it is a good investment or not. Also, most Banks will require a larger down payment to facilitate the loan.However, the leases are generally long term, 5-10 years with options usually, with rental adjustments (either by fixed amount or by market assessment) scheduled into the agreement and agreed to be both parties at the beginning. And despite the higher cost, commercial property investments are generally cashflow positive. The additional revenue allows you to comfortably engage a property manager to mitigate tenancy risk. Overall from a cashflow perspective, if you have the additional capital, an investment in a commercial property is a good choice.Mixed Use Properties: You will have seen these around. They consist of a shop on the ground floor and a unit on the top floor, or in the back. The shop owner lives and operates their business from the premises.Most Banks will consider this to be a commercial property, and will want to charge accordingly, but if you have a good mortgage broker they may be able to find an exception to that rule. The rental return is slightly better than a pure residential property, but not as good on a per square foot basis as a commercial property.The leases will be shorter as well, usually matching a residential lease, but a business owner is going to be reluctant to move so continuity is built in if the business thrives. If the business fails you can shuffle the tenant off at the end of the lease and find another one - maybe.While this seems like a solid compromise between the other two types, these properties have a limited resale market, so capital appreciation is not as good as either of the others on their own. Also, there is limited rental appeal for them as well, so vacancy risk is slightly higher.This is a reasonably specialized investment, and you would want to research the local market comprehensively before entering into a purchase like this.Unit DevelopmentAnother foundation method of property investment is unit development, and there are a number of characteristics involved in this option as well.This generally involves construction of either residential, commercial or mixed used units from a block of vacant land. The land was either vacant because you knocked down what was there previously (this is sometimes referred to as Infill Unit Development), or because a land developer has prepared it for you.The risks associated with these types of investment are mostly around timeframes, and therefore costs. You start with the vacant land and potentially a builder, but no firm timeframe around when rental income is going to become available, or when the sales will be finalised if that’s the methodology you are using. You have estimates, but it is very important you factor in cost and time contingencies when planning these projects. What happens when the builder takes too long and spends too much to complete the units?Some Banks will want pre-sales in order to provide finance, which can impact on your potential return, particularly when the market is growing. Pre-sales requires you to sell a portion of the development (for example 2 of the 4 units) before you commence construction. This way the Bank will be confident their funds will be returned. A pre-sale however is always sought at a discount.These two elements combined mean when it comes time to realize the capital gain at the end of the construction, the margins you anticipated at the outset might be compressed.Additionally if market conditions move during the course of the construction project, you can potentially be exposed to resale risk as well. You might have conservatively anticipated sales of $400,000 per unit, but due to a poor election result end up struggling to sell the units at $350,000. Your $80,000 return per unit has become $30,000 in a heartbeat and there is little you can do to mitigate this.One of the benefits of this type of investment however is the potential to mix the return method out of it. Build 4 units, sell 2 to reduce debt and rent 2 out.Land DevelopmentThis type of property investment involves taking a large parcel of land and turning it into residential or commercial lots. There is a high level of civil engineering and planning expertise required with this method. Approvals through local government can be time-consuming and will often involve unreasonable conditions (such as improving roads leading to and away from the developed area, or large areas of Public Open Space which deliver nil revenue in the long run).There are large sums of capital required to entertain this style of investment, and it is best handled in a syndicated manner, where a number of investors come together to pool their resources in support of the venture. This has the effect of spreading the risk, but also dilutes your individual return.Once again, resale risk is material, and the timeframes around when the returns become available are fluid, making it difficult to forecast project returns accurately. There can be good news stories out of this however, with a conservative plan laden with contingencies turns out to be too conservative and everyone makes more than they anticipated, but I would suggest these are rare overall.Land BankingThis is an even more basic form of property development. It involves purchasing large parcels of land and holding onto them for long periods of time. At the end of this indefinitely long period the land becomes something a Land Developer may want to purchase from you, or potentially partner with you in developing.Banks in general have a severe dislike of this type of investment. They are extremely risky and the timeframes around realization of the asset are rubbery at best, and fanciful at worst.This makes the investment highly capital intensive. With Banks being reluctant to lend against these types of assets, the down payment required is usually 60-70% of the purchase price. There is generally no revenue from the site to cover the interest repayments, so the investor will need to have another income source to manage that, or a substantial amount of additional capital that can be injected when needed.Land Banked properties can be difficult to sell if the market is not ready, and the investment needs to be considered to have a lifespan of multiple years.That being said the returns can be phenomenal if you can manage the risks. I have heard stories of a land banker who purchased a large parcel of coastal land for $10,000, and 30 years later realized it for $10,000,000.So Seriously, What’s the Best One?Like most investment strategies, being able to spread your risk is highly important, which means the best way of investing in property might well be a mix of two, three, or all of these options. Maybe buy a rental property, and a commercial property. Then some vacant land for a 4 unit development. Throw some of the return from this investment into a syndicate that is developing more land, or maybe a Land Banker waiting for an opportunity to develop in 3, 4, or 5 years.But everyone needs to start somewhere. And everyone needs something to aspire to. Maybe if you consider the different types of property investment options available you will have found something at both ends of that spectrum.

Real Estate Agents provide the following long list of services.Pre-Listing Activities1 Make appointment with seller for listing presentation2 Send seller a written or e-mail confirmation of listing appointment and call to confirm3 Review pre-appointment questions4 Research all comparable currently listed properties5 Research sales activity for past 18 months from MLS and public records databases6 Research "Average Days on Market" for this property of this type, price range and location7 Download and review property tax roll information8 Prepare "Comparable Market Analysis" (CMA) to establish fair market value9 Obtain copy of subdivision plat/complex lay-out10 Research property's ownership & deed type11 Research property's public record information for lot size & dimensions12 Research and verify legal description13 Research property's land use coding and deed restrictions14 Research property's current use and zoning15 Verify legal names of owner(s) in county's public property records16 Prepare listing presentation package with above materials17 Perform exterior "Curb Appeal Assessment" of subject property18 Compile and assemble formal file on property19 Confirm current public schools and explain impact of schools on market value20 Review listing appointment checklist to ensure all steps and actions have been completedListing Appointment Presentation21 Give seller an overview of current market conditions and projections22 Review agent's and company's credentials and accomplishments in the market23 Present company's profile and position or "niche" in the marketplace24 Present CMA Results To Seller, including Comparables, Solds, Current Listings & Expireds25 Offer pricing strategy based on professional judgment and interpretation of current market conditions26 Discuss Goals With Seller To Market Effectively27 Explain market power and benefits of Multiple Listing Service28 Explain market power of web marketing, IDX and Find Real Estate, Homes for Sale, Apartments & Houses for Rent29 Explain the work the brokerage and agent do "behind the scenes" and agent's availability on weekends30 Explain agent's role in taking calls to screen for qualified buyers and protect seller from curiosity seekers31 Present and discuss strategic master marketing plan32 Explain different agency relationships and determine seller's preference33 Review and explain all clauses in Listing Contract & Addendum and obtain seller's signatureOnce Property is Under Listing Agreement34 Review current title information35 Measure overall and heated square footage36 Measure interior room sizes37 Confirm lot size via owner's copy of certified survey, if available38 Note any and all unrecorded property lines, agreements, easements39 Obtain house plans, if applicable and available40 Review house plans and make copy41 Order plat map for retention in property's listing file42 Prepare showing instructions for buyers' agents and agree on showing time window with seller43 Obtain current mortgage loan(s) information: companies and & loan account numbers44 Verify current loan information with lender(s)45 Check assumability of loan(s) and any special requirements46 Discuss possible buyer financing alternatives and options with seller47 Review current appraisal if available48 Identify Home Owner Association manager if applicable49 Verify Home Owner Association Fees with manager - mandatory or optional and current annual fee50 Order copy of Homeowner Association bylaws, if applicable51 Research electricity availability and supplier's name and phone number52 Calculate average utility usage from last 12 months of bills53 Research and verify city sewer/septic tank system54 Water System: Calculate average water fees or rates from last 12 months of bills )55 Well Water: Confirm well status, depth and output from Well Report56 Natural Gas: Research/verify availability and supplier's name and phone number57 Verify security system, current term of service and whether owned or leased58 Verify if seller has transferable Termite Bond59 Ascertain need for lead-based paint disclosure60 Prepare detailed list of property amenities and assess market impact61 Prepare detailed list of property's "Inclusions & Conveyances with Sale"62 Compile list of completed repairs and maintenance items63 Send "Vacancy Checklist" to seller if property is vacant64 Explain benefits of Home Owner Warranty to seller65 Assist sellers with completion and submission of Home Owner Warranty Application66 When received, place Home Owner Warranty in property file for conveyance at time of sale67 Have extra key made for lockbox68 Verify if property has rental units involved. And if so:69 .. Make copies of all leases for retention in listing file70 .. Verify all rents & deposits71 .. Inform tenants of listing and discuss how showings will be handled72 Arrange for installation of yard sign73 Assist seller with completion of Seller's Disclosure form74 "New Listing Checklist" Completed75 Review results of Curb Appeal Assessment with seller and provide suggestions to improve salability76 Review results of Interior Décor Assessment and suggest changes to shorten time on market77 Load listing into transaction management software programEntering Property in Multiple Listing Service Database78 Prepare MLS Profile Sheet -- Agents is responsible for "quality control" and accuracy of listing data79 Enter property data from Profile Sheet into MLS Listing Database80 Proofread MLS database listing for accuracy - including proper placement in mapping function81 Add property to company's Active Listings list82 Provide seller with signed copies of Listing Agreement83 Take additional photos for upload into MLS and use in flyers. Discuss efficacy of panoramic photographyMarketing The Listing84 Create print and Internet ads with seller's input85 Coordinate showings with owners, tenants, and other Realtors®. Return all calls - weekends included86 Install lock box if authorized by owner.87 Prepare mailing and contact list88 Generate mail-merge letters to contact list89 Order "Just Listed" labels & reports90 Prepare flyers & feedback faxes91 Review comparable MLS listings regularly to ensure property remains competitive in price, terms,conditions and availability92 Prepare property marketing brochure for seller's review93 Arrange for printing or copying of supply of marketing brochures or fliers94 Place marketing brochures in all company agent mail boxes95 Upload listing to company and agent Internet site, if applicable96 Mail Out "Just Listed" notice to all neighborhood residents97 Advise Network Referral Program of listing98 Provide marketing data to buyers coming through international relocation networks99 Provide marketing data to buyers coming from referral network100 Provide "Special Feature" cards for marketing, if applicable101 Submit ads to company's participating Internet real estate sites102 Price changes conveyed promptly to all Internet groups103 Reprint/supply brochures promptly as needed104 Loan information reviewed and updated in MLS as required105 Feedback e-mails/faxes sent to buyers' agents after showings106 Review weekly Market Study107 Discuss feedback from showing agents with seller to determine if changes will accelerate the sale108 Place regular weekly update calls to seller to discuss marketing & pricing109 Promptly enter price changes in MLS listing databaseThe Offer and Contract109 Receive and review all Offer to Purchase contracts submitted by buyers or buyers' agents.110 Evaluate offer(s) and prepare a "net sheet" on each for the owner for comparison purposes111 Counsel seller on offers. Explain merits and weakness of each component of each offer112 Contact buyers' agents to review buyer's qualifications and discuss offer113 Fax/deliver Seller's Disclosure to buyer's agent or buyer upon request and prior to offer if possible114 Confirm buyer is pre-qualified by calling Loan Officer115 Obtain pre-qualification letter on buyer from Loan Officer116 Negotiate all offers on seller's behalf, setting time limit for loan approval and closing date117 Prepare and convey any counteroffers, acceptance or amendments to buyer's agent118 Fax copies of contract and all addendums to closing attorney or title company119 When Offer to Purchase Contract is accepted and signed by seller, deliver to buyer's agent120 Record and promptly deposit buyer's earnest money in escrow account.121 Disseminate "Under-Contract Showing Restrictions" as seller requests122 Deliver copies of fully signed Offer to Purchase contract to seller123 Fax/deliver copies of Offer to Purchase contract to Selling Agent133 Fax copies of Offer to Purchase contract to lender124 Provide copies of signed Offer to Purchase contract for office file125 Advise seller in handling additional offers to purchase submitted between contract and closing126 Change status in MLS to "Sale Pending"127 Update transaction management program to show "Sale Pending"128 Review buyer's credit report results -- Advise seller of worst and best case scenarios129 Provide credit report information to seller if property will be seller-financed130 Assist buyer with obtaining financing, if applicable and follow-up as necessary131 Coordinate with lender on Discount Points being locked in with dates132 Deliver unrecorded property information to buyer133 Order septic system inspection, if applicable134 Receive and review septic system report and assess any possible impact on sale135 Deliver copy of septic system inspection report lender & buyer136 Deliver Well Flow Test Report copies to lender & buyer and property listing file137 Verify termite inspection ordered138 Verify mold inspection ordered, if requiredTracking the Loan Process139 Confirm Verifications Of Deposit & Buyer's Employment Have Been Returned140 Follow Loan Processing Through To The Underwriter141 Add lender and other vendors to transaction management program so agents, buyer and seller canTrack progress of sale142 Contact lender weekly to ensure processing is on track143 Relay final approval of buyer's loan application to sellerHome Inspection144 Coordinate buyer's professional home inspection with seller145 Review home inspector's report146 Enter completion into transaction management tracking software program147 Explain seller's responsibilities with respect to loan limits and interpret any clauses in the contract148 Ensure seller's compliance with Home Inspection Clause requirements149 Recommend or assist seller with identifying and negotiating with trustworthy contractors to performany required repairs150 Negotiate payment and oversee completion of all required repairs on seller's behalf, if neededThe Appraisal151 Schedule Appraisal152 Follow-Up On Appraisal153 Assist seller in questioning appraisal report if it seems too lowClosing Preparations and Duties154 Contract Is Signed By All Parties155 Coordinate closing process with buyer's agent and lender156 Update closing forms & files157 Ensure all parties have all forms and information needed to close the sale158 Select location where closing will be held159 Confirm closing date and time and notify all parties160 Assist in solving any title problems (boundary disputes, easements, etc) or in obtaining DeathCertificates161 Work with buyer's agent in scheduling and conducting buyer's Final Walk-Thru prior to closing172 Research all tax, HOA, utility and other applicable prorations162 Request final closing figures from closing agent (attorney or title company)163 Receive & carefully review closing figures to ensure accuracy of preparation164 Forward verified closing figures to buyer's agent165 Request copy of closing documents from closing agent166 Confirm buyer and buyer's agent have received title insurance commitment167 Provide "Home Owners Warranty" for availability at closing168 Review all closing documents carefully for errors169 Forward closing documents to absentee seller as requested170 Review documents with closing agent (Escrow)171 Provide earnest money deposit check from escrow account to closing agent173 Coordinate this closing with seller's next purchase and resolve any timing problems174 Have a "no surprises" closing so that seller receives a net proceeds check at closing175 Refer sellers to one of the best agents at their destination, if applicable176 Change MLS status to Sold. Enter sale date, price, selling broker and agent's ID numbers, etc.177 Close out listing in transaction management programFollow Up After Closing178 Answer questions about filing claims with Home Owner Warranty company if requested179 Attempt to clarify and resolve any conflicts about repairs if buyer is not satisfied180 Respond to any follow-on calls and provide any additional information required from office files.Want to learn more about Real Estate?Follow me on Instagram.Subscribe to the Holton-Wise YouTube Channel.