Contingency Removal-Vacant Land 2: Fill & Download for Free

I have found a block of land that I want to buy, but it is not for sale. How should I go about wording a letter that entices a positive response?Disclaimer: I’m not a lawyer, so this isn’t legal advice.Gordon and Mark provided some interesting answers . . . with which I absolutely disagree.First: Never, ever, ever, ever give a check directly to the seller for any amount. Send it to your lawyer or settlement company. You can make a copy of it (if you’re doing a physical check, rather than a wire transfer) and include it in the letter you send to the seller. But that language in the letter is not going to protect you if the seller simply wants to cash your check. I could go on for several more paragraphs on why sending money directly to the seller is a horrible idea. But, look: Ask your real estate lawyer.Second, it helps to determine what the owner’s motivation might be to sell. You might not hit it exactly, but the closer you come, the more effective your communication will be. As an investor, I come across people who have many different motivations for selling. However, that means there are many different ways I can structure an offer that works best for them. Remember: It’s price and terms.Here’s just a quick example. Assume the house, if listed, might sell for $400,000 after 90 days on market. Fixed up, it would sell for $550,000, but it needs $70,000 in repairs. Let’s look at the offer based on the motivation.Motivation: Wants to sell quickly for whatever he/she can get. One solution: An all-cash offer with a quick (14 day or less) close. Offer $300,000.Motivation: Wants to sell for $450,000. Won’t budge on price. One solution: Owner financing: $1,250 a month for 30 years.Motivation: Wants to sell for $700,000. Won’t budge on price. One solution: Owner financing: $1,945 a month for 30 years.Motivation: House hasn’t been lived in for 2 years, and there’s mold throughout the basement. One solution: Offer $300,000 cash. (Mold is just another repair.)Motivation: Tenants haven’t paid rent in more than a year (and you’re in a jurisdiction that isn’t too tenant-friendly). Offer $300,000 cash if the house is delivered vacant. Or offer $290,000 cash contingent on you being able to remove the tenants. Then you either offer the tenants $10,000 or less to move and pay for the moving van. Or you hire a good eviction lawyer.Motivation: Wants to pay for grandchild’s education, which is going to cost $50,000 a year for 4 years. One solution: Offer $100,000 cash up-front and $50,000 a year for 4 years.Motivation: Wants to sell the house, but is looking for a good return on investment. The 1% (or less) that banks are paying isn’t enough. Offer $280,000, owner financing, 30 year term, at 7%.Motivation: A couple just got divorced. The court directed that the wife sell the house and divide the proceeds with her ex. She hates her ex; the divorce occurred because he cheated on her multiple times. She wants to stick it to her husband; financially, she’s doing OK. Offer her $200,000 cash.Motivation [for a block of land]: a couple bought the land decades ago, planning to build a house on it. They never got around to it, and the husband died 5 years ago. The land itself isn’t costing her much except for the rather high annual real estate taxes. One solution: Offer 50% of the value of the land in cash.Every seller has a different motivation. You can’t guess at them all, nor should you. You should make an attempt to find out what the seller’s motivation is. Then tailor your pitch and your offer to their specific motivation.I’ve run into some of those situations above. I personally know investors who’ve run into them all.You can’t cover all those situations in a single marketing piece or effort. However, if you choose your lists or neighborhoods properly, or you do the right sort of marketing, you can narrow you leads down substantially—to people who’ve inherited homes, to people with residential lots they never built on, for people who won’t budge on price (Tip: The MLS Expired Listings is a compiled list of overpriced properties), and so on. You target market; then you tailor your offer to the motivation.Now: Back to the original question. (Sorry for the time it took to get here but, frankly, the information above is far, far more important than precisely what you say in the letter.) As I mentioned above, at least try to guess general areas of motivation. A good Realtor can help. But here are some tips:If it’s in a residential area, with houses built 30–40 years ago, it’s likely the situation I described above. Someone bought the land, planned on building, and never got around to it. From there, check the tax records to try to confirm that. Was it bought 30–40 years ago? And there are other clues to look for, too . . . a bit too complicated to go into here.I might write something like:Dear Mrs. Smith:The other day, I was driving through Centreville and I saw your lot at 123 Main Street. In fact, I happened to be looking for a lot near Centreville and yours seemed perfect. I understand that you’ve owned the lot for 40 years, so perhaps your original plans for the land have changed.I’d love the opportunity to talk to you about your plans for the lot and whether you might consider selling it. I know Centreville is considering raising its real estate taxes, so it might make sense to sell before your taxes go up again. Centreville’s building inspectors also have gotten tougher on vacant lot inspections—making sure the grass is mowed, etc.Please contact me at xxx-xxx-xxxx anytime—day or night, whenever is most convenient for you—so you can tell me more about what you’d like to do with your lot.Yours trulyJohn Q. InvestorP.S. I’m not a real estate agent, so if you sold your lot to me you wouldn’t have to pay any real estate commission.That’s just a very rough attempt, but the elements are there:Not a hard sellGuessing at a few possible motivationsMaking the potential seller “feel the pain”Adding the sweetener of no commission

It’s funny you say, Indiana. I loaned a good friend 100,000 to invest in Elkhart, just before the crash that put all the RV mfgrs down and out.Mobile homes are great investments but ONLY if on good land. Never buy in a park. When vacant, you now lose the park rent and that removed your investment very fast. Appreciation is focussed on land and location. Buy JUNK on land. That is a good investment. Your property taxes are very low in that state so you have an advantage.When you are ready to move forward, please excersize this lesson of humanity and share with me, your experiences and how this made your family and so many others, “get a life” and give a chance for quality of life:From other posting:Hold onto your hat… Here comes the answer of a life time:Most common are based on a wide variety of inspector lited items such as septic system, Roof, windows, energy audit to make sure there is good insulation and countless more.You can make an offer with ANY contengency you can come up with. Don’t think like a realtor, think like a human. If you have 15% down and don’t want to pay PMI insurance (private mortgage insurance) because you don’t have the minimum 20% down, (note that this debt reduces your buying power/value which you now qualify for a lesser home), contract a contengency that the seller pays you 5% in one way or another, as a contribution. It is then on the sellers side AND the realtors who may all participate to get you this 5%.A better contingency factor is this… You want 4 bedrooms but everything in your budget is only 3. You have been “just OK with those homes you have been shown but “boy oh boy” would you love that one across the street, the problem is that it’s $50,000 more than you can afford. MAKE THE OFFER WITH THIS CONTINGENCY: Seller retains partial ownership (he would now be an investor) and you can then RENT his portion for what ever deems appropriate or even bizarre! Look at this example:The home is selling for $400,000.You should have 20% down payment ($80,000)You have only $60,000You purchase 80% of the home for $300,000 and the seller retains 25% ownership.Let’s say that this is a builder and the market went a little flat so he is probably considering taking a $50,000 reduction while his profit would have been $120,000 if sold for $400,000.The realtor EXPENSE to the seller is now reduced, based on the sale of $300,000, not $400,000 and he gets to sell you the other 25% on his own, later.This seller is now accepting 50,000 less but he has good credit so money in his pocket is not really necessary to borrow funds for the next spec-house. The actual money out of his pocket is NOT really 50,000 but much less because a. no realtor fee on that 100,000 (about $5,000) and he is NOT negotiating a reduction in his selling price, and MOST OF ALL:He is now paying short term capital gains on a much reduced amount. Let’s say the capital gains reduction is about net $90,000 and his tax was 20%, he now KEPT $18,000 in his pocket!When all factors are IN, the seller has lowered his IN-cash flow by far less than the 100,000, in fact, with the example that he may have considered lowering by 50,000 and really didn’t, he is almost going to make more today, at the closing, than if he didn’t accept your contingency offer. In fact,…In the long run, this seller is making a TON more money. The 25% retained ownership is now a long term capital gain (in the future). Now HE gets to put contingencies on that 25% which I will example a few:Buyer must pay seller the 25% of fair market value but no less than the $100,000 in 18 years. Why 18 years? Because he has a new born who will need a college education in 18 years. This is NOT his college fund that he got for FREE!Buyer must pay to the seller, 1% spiff (like rent) on every aniversary of the closing date. This means that you will give him $1000 for every year that you own the 75%.No prepayment penalty. You can sell the home and he gets paid off at any time but with no less than the $100,000 and the selling price is bsed on fair market value at that time. If YOU want to sell below fair market value, the difference is NOT his loss. Now lets see how BOTH of you make out:First, YOU got your big beautiful 4 bedroom home and had a life changing experience, you can now FIT into a home you don’t need to move out of in 3-years. YOU now have 2 extra kids because you found that this home is perfect and so on.Ten years went by, the home is now worth $600,000 and you decide to sell, get divorced, etc. The home sells andThe 25% owner now gets $150,000 of nearly tax fee income.You have paid down the $250,000 first mortgage to say, $175,000, netting you 600,000 - 175,000 - 20,000 commission to realtors - 250,000 balance = $155,000 to split with your X or buy a new mansion!You have paid higher property taxes for this home but saved the comparable amount by avoiding the PMI for not having 20% down.The seller MAY have an interest for a negotiated price, to extend a portion of HIS ownership to help the next buyer, ENHANCING THE SALE for You, Him, the realtors and the NEW buyer! He would WANT to extend this because YOU just taught him how to compound his financial wellness by giving him a copy of this message and he became a 10 times multi millionaire because of it.You, the seller and I have become great friends because we collectively initiated CHANGING THE WORLD, by reducing the number of hands in OUR pocket.OK, so now you and the readers are the very first to get this most incredible lesson. A very important fact is that this is as easy as signing the contract. Expect to pay $700.00 for an attorney to draw up the documents and when you do, have him contact me so I can make it easy. Lawyers do not usually think out of the box and remember, they are just another hand in your pocket as well.Me? Richard Townsend, Townsend Building and Finance, Retired because I help people like this. 119 Hall Rd. Barrington, NH 03825 603 498–0747