Author Topic: Extremely lowball offer (for vacation home)  (Read 5910 times)

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Extremely lowball offer (for vacation home)
« on: July 16, 2016, 09:47:04 AM »
I have been following a 17-acre vacation cottage property (1-bedroom, old but in decent shape) in a very desirable area near the ocean. It's surrounded by wildlife reserves and nearby are some very expensive homes.

The place has an outhouse, no electricity, and is heated with a wood stove -- extremely unusual for this area, but actually the precise sort of thing I happen to be looking for in a vacation property. (It did recently pass a perc test.) It's even on a huge salt marsh so tons of birds, baby crabs etc. Also stuff that interests me a lot. (Probably bugs too, but.)

It also happens to be in an area that will probably be underwater in 10-30 years due to climate-change induced sea level rise -- at least during storms. So there's that. The house is up on a small hill so it may be OK, but it's completely possible that some or most of the land will be flooded at least part of the time in the future.

Records show that the property transferred for $1 in 2011, so probably a relative giving it to someone else. It consists of 3 lots packaged together and went on the market in August 2015 for $299K. Price was reduced several times and is now down to $179K. According to Zillow, 9000+ shoppers viewed this home but only 4 saved it (and one of them was me). The listing now states "Calling for ANY and ALL offers by July 21!!" Taxes are $2200/year. (or what it would cost to RENT a 1-bedroom cottage for a week in the summer in that area)

I am tempted to offer them $50,000 in cash and see what happens. Does that sound crazy?

(I have been looking for a place like this for years. Yes, I am aware of all the reasons you should not buy a vacation home and I still don't for sure if this is the right place or if I should even do it at all. But just humor me for the time being.) Thanks for your responses.

ender

  • Walrus Stache
  • *******
  • Posts: 5028
Re: Extremely lowball offer (for vacation home)
« Reply #1 on: July 16, 2016, 09:53:38 AM »
How badly do you want it?

Make an offer that you would be content if they accepted but also content if they rejected.

Your post makes it sound like you will be sad if you make an offer for $50k and don't get it, so I'd suspect that you might want to make an offer that is higher.

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #2 on: July 16, 2016, 10:09:02 AM »
I would not be sad if I didn't get it actually -- I'm used to not being able to have a country house (so on some level I'm always sad about not having one -- this wouldn't be any different...). There is always another property. The pertinent issue is that $50K is really about all I can spend!

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #3 on: July 16, 2016, 10:14:42 AM »
I was also just reading about flood insurance for this part of the country -- premiums have skyrocketed (from like $800 to $10K a year in some spots) and apparently this is having a big depressive effect on prices. One RE agent quote in a news article: "For each $5000 increase in premium the value of the property drops by $100K." This tells me that someone buying and building on these lots is unlikely unless they like throwing money away. (I expect I wouldn't bother with flood insurance unless I could get it cheap.)

KBecks

  • Handlebar Stache
  • *****
  • Posts: 2067
Re: Extremely lowball offer (for vacation home)
« Reply #4 on: July 16, 2016, 10:28:03 AM »
You want to pay $50k on a place that might be under water, literally, in 10 - 30 years??  How does that make sense?

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #5 on: July 16, 2016, 10:47:55 AM »
As an investment, no, it likely doesn't make sense (though I still haven't finished researching the flood issue -- it's about 2 miles from the coastline and whether or not it floods in 2050 really depends on how things go climatewise in the next few years). I'm not thinking about it as an investment. But having a place like this I could go to regularly (it is pretty easy to get there from where I live) could be worth it to me and my family emotionally, even it's only for 10-15 years.

Vacation rentals have become just insanely expensive in our area, even for a person who doesn't care about luxury, and in 15 years I could easily pay close to $50,000 renting a place for my family just 1 week a year. And that place certainly wouldn't be on 17 acres. More like 17 inches from the cottage next to it.

We had one place we used to go to every year on Cape Cod that we loved, an unbelievable find. We don't go anymore. In 5 years the price went from $1600 a week to $6000. Even camping costs freaking $50-$80 a night these days.


totoro

  • Handlebar Stache
  • *****
  • Posts: 2102
Re: Extremely lowball offer (for vacation home)
« Reply #6 on: July 16, 2016, 11:02:56 AM »
Well, it is not going to cost you $50k.  It is going to cost you $50k plus lost opportunity costs on the $50k (7% per year compounding), plus property taxes on the 17 acres, plus repairs and maintenance.   At the end of the day if the property is going to be worthless just make sure the cost really is worth it.   

In our case we enjoy going to the same place we own every year.  I personally dislike rentals and hotels so it might be worth it if you are like me but given the total cost I wouldn't do it unless I thought it would be worth at least $50k later on.  The cheap price of entry would not be enough, but for some it would - look at all the timeshares and land leases out there!

forummm

  • Walrus Stache
  • *******
  • Posts: 7396
  • Senior Mustachian
Re: Extremely lowball offer (for vacation home)
« Reply #7 on: July 16, 2016, 01:25:06 PM »
I wouldn't buy something that's going to be underwater soon. Why throw away money?

oldladystache

  • Pencil Stache
  • ****
  • Posts: 692
  • Age: 75
  • Location: coastal southern california
Re: Extremely lowball offer (for vacation home)
« Reply #8 on: July 16, 2016, 01:35:38 PM »
I would be tempted to offer them maybe 20K. Then see what happens.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3434
Re: Extremely lowball offer (for vacation home)
« Reply #9 on: July 16, 2016, 03:51:21 PM »
I was also just reading about flood insurance for this part of the country -- premiums have skyrocketed (from like $800 to $10K a year in some spots) and apparently this is having a big depressive effect on prices. One RE agent quote in a news article: "For each $5000 increase in premium the value of the property drops by $100K." This tells me that someone buying and building on these lots is unlikely unless they like throwing money away. (I expect I wouldn't bother with flood insurance unless I could get it cheap.)

You know, if it's actually possible to get for $50k, I'd just not insure it. It sounds like the structure isn't worth much anyway.

-Walt

Jim2001

  • Stubble
  • **
  • Posts: 203
  • Location: Los Angeles, CA
Re: Extremely lowball offer (for vacation home)
« Reply #10 on: July 16, 2016, 04:04:06 PM »
I would be tempted to offer them maybe 20K. Then see what happens.

+1 for an ultra low ball, all cash offer.  So what if it gets rejected.  Ask them to counter.  You can only go up from where ever you start.

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #11 on: July 16, 2016, 06:07:06 PM »
I thought she was kidding about the $20K! Hmm, very interesting. I agree that flood insurance wouldn't probably be worth it.

SwordGuy

  • Walrus Stache
  • *******
  • Posts: 6231
  • Location: Fayetteville, NC
Re: Extremely lowball offer (for vacation home)
« Reply #12 on: July 16, 2016, 06:31:11 PM »
They got the property for $1 but they might have a heloc lien on it.

Look on the county's registrar of deeds website. (Or call them if need be.)  What you want to know is what (if any) liens are against the property, what the amount, dates, and if possible, interest rates were.

Some systems use a book and plat # instead of a street address to locate the property. You can get that from the county property tax records or possibly zillow or trulia.

Once you have that, do a google search for mortgage rates for the month before the mortgage lien.

Then go to a mortgage calculator and calculate what they would owe on the property if they had a 15 year mortgage and made the minimum payments.  That will give you an idea of the minimum price they might accept (after adding in 6% realtor commissions).

If it was a regular mortgage instead of a heloc use 30 years instead.

They may just want to unload it.  Offer $10k.


RodFoster

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: Extremely lowball offer (for vacation home)
« Reply #13 on: July 16, 2016, 08:10:21 PM »
The underwater thing seems odd being 2 miles from the water.  How can you be at all certain it's 10-30 years? That sounds like a wild guess.

desk_jockey

  • Stubble
  • **
  • Posts: 245
Re: Extremely lowball offer (for vacation home)
« Reply #14 on: July 16, 2016, 08:12:54 PM »

and in 15 years I could easily pay close to $50,000 renting a place for my family just 1 week a year.

Sounds like you really want to buy this property if you making these type of statements.  If you really think inflation will be that outrageous over the next 15 years you should but beachfront now. 

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #15 on: July 16, 2016, 08:24:42 PM »
I meant that the total spent renting for say $2000-$3000 for one week, for 15 years, could be around $50,000, not $50,000 for one week 15 years from now! : )

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #16 on: July 16, 2016, 08:39:00 PM »
Re: property being under water: if you look at climate change sea level rise projection maps, this area is definitely affected, even with only 1 or 2 feet of rise. It might not be like this all the time, but during storm surges and so on it could. Much of the area is salt marsh, which is affected by tides.

On liens: I looked up the records and I see no liens. Property has been in the same family since 1968 (they paid $7000 for it) and ownership was converted to a family trust in 2011. (that was the $1)

oldladystache

  • Pencil Stache
  • ****
  • Posts: 692
  • Age: 75
  • Location: coastal southern california
Re: Extremely lowball offer (for vacation home)
« Reply #17 on: July 16, 2016, 08:46:39 PM »
Many years ago my mom wanted a certain vacation property and my dad didn't want it. Just to humor her he made a ridiculously low offer on it. Boy was he disgusted when they accepted it.

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #18 on: July 16, 2016, 08:52:06 PM »
Ha! I like that story...

I am actually wondering now what the tax implications are for the trust when/if they sell. It looks like it's actually been just about 5 years since the property went to the trustees (presumably the owners' kids). Maybe this is why they are suddenly in a hurry.

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #19 on: July 16, 2016, 09:07:14 PM »
Just did a little research online about the tax implications of selling inherited property. Complicated. When it comes from a trust it's even more complicated. Good thing I work with a bunch of lawyers.

The most recent tax assessment has the value of this place at $125K. When the property went into trust it was valued at $157K. From what I just read, often when you inherit property the cost basis is whatever the property was worth when the owner died. So looks like the trust would be facing a capital loss, not a gain (if they sold for less than $157K or whatever the market value was in 2010).


electriceagle

  • Bristles
  • ***
  • Posts: 491
Re: Extremely lowball offer (for vacation home)
« Reply #20 on: July 18, 2016, 05:27:30 PM »
I suppose that I'm the outlier here, but I think that your offer is too low.

If rents are at $2k/month, I can't see why they wouldn't want at least $125k, even if there are maintenance problems and the need to build an ark.

If this is a vacation location, there is likely to be a neighbor who specializes in renting property on airbnb. Why wouldn't they list it, pay someone to manage it and bank the resulting cash flow?

mskyle

  • Pencil Stache
  • ****
  • Posts: 693
Re: Extremely lowball offer (for vacation home)
« Reply #21 on: July 19, 2016, 12:00:20 PM »
I suppose that I'm the outlier here, but I think that your offer is too low.

If rents are at $2k/month, I can't see why they wouldn't want at least $125k, even if there are maintenance problems and the need to build an ark.

If this is a vacation location, there is likely to be a neighbor who specializes in renting property on airbnb. Why wouldn't they list it, pay someone to manage it and bank the resulting cash flow?

Well, those rents ($2K a week, not $2K a month) are probably for places that have indoor plumbing and electricity. It's more work to rent out a nonstandard place. My aunt has an additional unit on her property on the ocean, and it has electricity and a kitchenette but no running water in the unit itself (although it does have a plumbed outhouse). She can't get the same rents for that place as she would be able to for a house with running water.

But if the OP would just as soon stay in a place with no running water and electricity, and would in fact choose to rent such a place if it were available, it could still be worth that much to the OP.

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #22 on: July 19, 2016, 04:44:23 PM »
Even I wouldn't pay $2000 a week for a cabin with no plumbing : ). I do think that there are people like me who'd pay, say, $500 a week though.

I looked at sales in the area that were similar over the last couple of years -- hard to find, since there really hasn't been anything publicly recorded that is the same kind of place, so I also looked at just land without housing too. Even without the sea level rise issue, I think the place is still overpriced. I ended up with a couple of land parcels and one mobile home on 2 acres for comparison. Using those, I'm guessing that the "right" price--again, keeping sea level out of it-- should be somewhere around $85-$125K. I know that's a wide range, but I am not sure if the increase in insurance premiums has hit this area yet. Hoping to find that out this week.


earlycheckout

  • 5 O'Clock Shadow
  • *
  • Posts: 9
Re: Extremely lowball offer (for vacation home)
« Reply #23 on: July 21, 2016, 02:33:02 PM »
Since you can only afford to offer the 50k, the issue is not whether its too low or not (you will only find that out if you make an offer). The real question is whether you should try to buy it for 50k or not.

So figure out the true cost overall (following great suggestions by others). And also try to get closer estimates of the probability over time of it going underwater (most of that data is likely available; even though it is only probabilistic, it is information you can use to allow you to work with expected values). So if it's say a 50% chance in 30 years...you are looking at a 50k+ (whatever you put in)/2 loss in 30 years. And so on. 

Then whether it is worth it to you. And only you can know. 

I'm in the camp of having always wanted a rural vacation home so I get the intrinsic/non-financial side of it.  We love our place so much and can't put a value on it. Wasn't 'rational' in a financial sense perhaps, but it is central to our biggest joys in life. Even when not using it, we get so much psychological satisfaction thinking about it/looking forward to going there. It is a place we decompress and I would say it is critical to our lowered stress and well being.

But we like to putz around, and work on the land and do projects with our hands there (it's not work for us but fun and rejuvenating). And so renting would never have given us the same thing. For others that find those kinds of activities to be something they want to avoid, renting is way better.
 


arebelspy

  • Administrator
  • Senior Mustachian
  • *****
  • Posts: 28234
  • Age: -999
  • Location: Seattle, WA
Re: Extremely lowball offer (for vacation home)
« Reply #24 on: July 21, 2016, 06:15:45 PM »
"Calling for ANY and ALL offers by July 21!!"

Given the date, I'm wondering if you put in a lowball offer.
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with three kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

Dicey

  • Senior Mustachian
  • ********
  • Posts: 11437
  • Age: 61
  • Location: NorCal
Re: Extremely lowball offer (for vacation home)
« Reply #25 on: July 23, 2016, 05:00:44 PM »
Also, consider what the plumbing would cost to install, 'cuz in a few years, the novelty may have worn off. There may also be a reason why there isn't plumbing that you can't correct, such as weird zoning restrictions.

OTOH, since we're past the deadline, maybe it's all water under the bridge over the house.

hoping2retire35

  • Handlebar Stache
  • *****
  • Posts: 1401
  • Location: UPCOUNTRY CAROLINA
  • just want to see where this appears
Re: Extremely lowball offer (for vacation home)
« Reply #26 on: August 11, 2016, 08:32:29 AM »
Update?

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #27 on: August 14, 2016, 07:43:52 PM »
Hi all. I ended up not even going to look at it, and I made no offer at all. It would just have made me sad. (Property is now under agreement, but Redfin doesn't say yet how much they got for it.)

However this thread actually made me realize even more how much being close to nature means to me, and that -- along with the impossibility of the school situation here -- means that we have actually decided to move out of the Boston area entirely and back home to Wisconsin where I grew up and where my family is. It's just too expensive for us here, and Grandma isn't getting any younger.

So in a year I hope to have cashed out some decent equity in my house (our neighborhood has become very hot lately) and be starting to settle in a lower COL place, with lots of free babysitting, friends, and nature nearby.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Extremely lowball offer (for vacation home)
« Reply #28 on: August 15, 2016, 07:20:14 AM »
Hi all. I ended up not even going to look at it, and I made no offer at all. It would just have made me sad. (Property is now under agreement, but Redfin doesn't say yet how much they got for it.)

However this thread actually made me realize even more how much being close to nature means to me, and that -- along with the impossibility of the school situation here -- means that we have actually decided to move out of the Boston area entirely and back home to Wisconsin where I grew up and where my family is. It's just too expensive for us here, and Grandma isn't getting any younger.

So in a year I hope to have cashed out some decent equity in my house (our neighborhood has become very hot lately) and be starting to settle in a lower COL place, with lots of free babysitting, friends, and nature nearby.

Having that mental clarity is awesome. Sounds like a great decision to go back to Wisconsin.

Enigma

  • Bristles
  • ***
  • Posts: 486
  • Age: 40
  • Location: Clarksville, TN
Re: Extremely lowball offer (for vacation home)
« Reply #29 on: August 15, 2016, 01:12:27 PM »
I have lowballed many offers and not gotten it.  Just a way to play the game.  Every now and then you might get lucky

Penelope Vandergast

  • Stubble
  • **
  • Posts: 101
Re: Extremely lowball offer (for vacation home)
« Reply #30 on: August 17, 2016, 08:56:01 AM »
Oh, I will try again, I'm sure! I have been learning lately how much fun negotiating can actually be, and that people say "yes" more often than you think -- you just have to realize that you can ask. Making an offer on a country shack is definitely in my future.

GreenEggs

  • Pencil Stache
  • ****
  • Posts: 802
  • Location: Here & There
Re: Extremely lowball offer (for vacation home)
« Reply #31 on: August 17, 2016, 09:21:42 AM »
Maybe you can find something with a small stream that you can dam up, and have that place on the water that you wanted.

;)

Goldielocks

  • Walrus Stache
  • *******
  • Posts: 6637
  • Location: BC
Re: Extremely lowball offer (for vacation home)
« Reply #32 on: August 17, 2016, 09:47:52 AM »
Huh,

Have you thought to call the owners and offer to rent it from them for three months?   For $2500??
They may just choose to stall the sale and rent it to you, and you can take weekends there and enjoy it for a while, and let it go again for very little money...  (and be glad that you don't own it by that point)