It’s been 3 1/2 years since I first blogged about this topic, which on its own, should tell you just how long it takes for some developers to put a shovel in the ground!
The house next door to my mother’s is on a strange “L-shaped” lot, whereby a small, irregular piece of dirt behind her back fence belongs to the house next door.
Back in 2014, I wrote about my discussion with the developer, and how much he wanted for the land.
But today, the newly-constructed houses on the lot are about 70% complete, so I wanted to show you the land in question and get your opinions…
So what do you think?
Are you enthralled by the opportunity to clear-cut that small piece of land, even it out, rake in a load of topsoil, throw down some sod, and give it a fresh look?
Or does it look like good place to bury a body?
My mother’s backyard is about 29-30 feet deep (from the back deck), and that piece of land behind her is 30-feet wide, by 29-feet deep (I said “30” in the video, but I was rounding up). Wouldn’t it be nice to double the size of her backyard?
Back in 2014, I explained that the developer had acquired the 45 x 139 foot piece of land (which has a 75-foot width at the back, due to the 30 x 29 foot square attached, forming the L-shape) for $425,000.
Apples-to-apples, simply looking at the cost of that square footage, in the context of the acquisition of the entire lot, the piece of land in question would be “worth” $51,895.50.
But that was four years ago!
Did I miss my chance?
Was I crazy to spit in the face of that paltry $50K for a piece of dirt?
Now how about this: if these new houses sell for $800,000 each, then does the price of that piece of land rise significantly?
Or what about the other side of the coin; what if the buyer of that house, probably making a 10% down payment, sees little to no value in an odd piece of land, annexed to his or her backyard. What if that buyer would relish the opportunity to add $10,000, $20,000, or $30,00 in cash?
We could argue this any number of ways.
But four years after the original post, and now having seen the piece of land in question, I’m eager to get your valuations.
Because the developer has played his hand – he wants this piece gone.
He’s asking my mother about it every day, and does not want to seem to go to market with these two new homes, and that L-shaped backyard…
at 8:02 am
If they put a pool there and it’s gonna be “Marco”… “Polo” …
All summer long.
at 8:28 am
If I was considering one of the semis I would spend 50K more for the extra backyard space.
Real estate millennial
at 9:16 am
I don’t know the property zoning bylaw for that area, but if the frontage of the home was included in that piece of land to the rear it would have allowed the developer to build a larger home. He may have to get a minor variance for exceeding lot coverage for removing that piece to the rear. I would rather deal the new homeowner but I’d cover the cost of transfer and no more than 20k the land is an aesthic thing and has minimal value because it’s highest and best use is just grass. The new homeowner is far more likely to be enamoured with offer than the developer because 20k will mean more to the homeowner than the developer who has already sunk over a million into the project, 20k is a drop in the buck at that point.
at 10:15 am
You can’t deal with the new owner. As soon as you approach him about selling you the land, his estimate of his own IQ will go up ten points because he was “smart enough” to recognize the value of buying the larger lot — even if that didn’t factor into his decision at all. It’s a classic of the endowment effect. Besides, he’s financed the place anyway, and he’ll gladly pay the $100/month so that every time he looks out his back window, he can think of how much smarter he is than his neighbours. Further, he’ll probably have an Unbreakable Mortgage(TM) from a Bank That Really Cares, which would be happy to lard on Usual and Customary Fees and Charges, as May From Time to Time be Amended in Their Sole Discretion.
With the developer, it’s strictly a money transaction, except you’ll want to bid just above the threshold where he’d cut off his nose to spite his face. Knowing where that threshold is? Priceless.
at 10:28 am
I agree with this. I also think that the buyer is going to pick this lot over the other lot because it has something extra. If that is an emotional part of the purchase, then the chance of them selling for a small amount is going to be gone. David is assuming it will be someone with 10% down that will be very happy to get his 20K. It could be someone with 50% down, who doesn’t care about the little bit of extra money and wants a place for their kids or grandkids to play. In that scenario, you are not going to have a chance to buy the land.
at 10:21 am
Question – would the new piece of land permit the owner of your house to build a bigger home? How much would that potentially be worth in the market without having to go through the OMB (or whatever it’s now called) process? Thinking long-term maybe you’re going to develop her piece of land down the road and now will have more selling power?
at 10:29 am
Did your mom also help you film this??
at 3:17 pm
I would say depends on your mom and how long she is going to stay put here. If she loves gardening and back yard parties, expecting her grand-kids to spend summers there – the price of 50 K seems reasonable. If she is not a garden person – just low ball and do not regret whatever the outcome. Developer already used existing lot total sq. footage to his advantage and is trying to squeezes a little bit extra.
at 10:23 am
I would say that frontage is worth more per square foot then depth. The developer can sell the house for the same whether that piece of property is included or not.
$25,000 would probably be enough for them as it is just padding profits and there really aren’t any other buyers for it.
at 11:16 am
You are the expert on valuations, therefore, all I am going to say about it is wouldn’t it make more sense to compare your Mom’s house value with/without that piece of land to determine how much it’s worth TO YOU rather than the developer’s?
On the more important subject of how much you/she might want to pay for it depends on how badly you want it. If you are willing to walk away from it or risk the new seller not wanting to sell to you then, as others have suggested, you may want to offer somewhere between the devevloper’s cost to sever and his extra profit if he sold as is.
Having said that, you have compromised your bargaining position when you stated in your Dec 2014 post: “You might even say I’ve been salivating.”.
Whenever you really want something, you have to pay market price for it, unfortunately, which in this case is what the developer wants for it. As history shows you, if you really want something, buy it right away before the price goes even higher or you lose your chance to buy it all together. What you don’t want to say in the future when you are sitting in your Mom’s backyard listening to your neighbours enjoying their extra large backyard is: man I could have had that piece for only $50-75k back in 2014/2018.
An alternate option, thinking outside the box, is to have someone you know buy the house next door as is that may sell the piece to your Mom in the future. Do you know anyone who is looking for a house and may benefit from living next door to your Mom?
at 11:27 am
Think further outside the box.
What does the developer have that David wants?
What does David have that the developer wants (or will need, soon)? Amazingly, the numbers even come out about right. I oughta get a finders’ fee. David, you know how to find me.
at 1:16 pm
@Ralph I usually think further outside the box than most. Perhaps my last sentence was too subtle for you. I was going to add an Everybody Loves Raymond reference for a hint but decided that would be too obvious…
The only problem is the train tracks. I think David is pretty clear on how he feels about them.
at 6:34 am
Enjoyed reading the comments and the post