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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: Penelope Vandergast on April 23, 2017, 09:45:02 AM

Title: How to approach developer offers in very hot Boston market
Post by: Penelope Vandergast on April 23, 2017, 09:45:02 AM
I'm in a very hot Boston neighborhood (places go under contract within days, I've seen about 10 places go for $20-$80K over asking in the past year, prices are up probably 20-30% since 2 or 3 years ago) and I am planning to sell in the next couple of months. Could probably get at least 40% more than I bought for 12 years ago.

House needs some cosmetic work (kitchen and bath both old and we are about to paint the exterior, which really needs it) but even so, I am pretty sure it would sell quickly because the location is spectacular, it's a really cute little 3-bed house w/finished attic, and inventory is low.

Many houses are in pretty battered shape here but people (developers?) buy them, do a gut reno and pretty much double their money. There are also new houses/multi-units being built everywhere, on every spare scrap of land, with finished sale prices for say 3 beds upwards of $700K (and selling very quickly at those prices, which in Boston are a bargain for new construction).

Note that my house is odd because it is actually deeded as a condo -- there are 2 SF houses on 1 lot, and we are a condo association of 2. Both houses need work (especially my neighbor's).

Through a family connection, we already have a developer asking if we want to talk --especially if my neighbor (call her M) got in on the conversation (which I think she would be interested in -- FYI we get along very well and have actually discussed this possibility before).

Also -- theoretically another neighbor right next door (who we also get along with), whose 2-family house is also in rough shape, might be interested as well -- so developer could potentially get 2 large lots with 4 units in an amazing location. (M's house is big enough to be divided into 2 or even 3 units also.) We are pretty much the only houses left on our street that haven't been renovated in the last few years : ).

How do you suggest we approach the idea of selling to a developer in this market? I would of course get a couple of market-rate appraisals and would likely talk to more than one developer if we were serious about going that route, get a good lawyer, etc. Obviously I'm not interested in giving the developer a sale price in such a hot market, but I am wondering what people might advise regarding entering into any sort of negotiation with them.

I am also wondering if we could potentially do better with a developer, given that all houses need work, than we might on the regular SF market where we'd probably be paying an agent etc. Or would we do worse?

Thanks!
Title: Re: How to approach developer offers in very hot Boston market
Post by: Landlady on April 25, 2017, 05:38:21 PM
The Seattle market is similar right now with developers trying to buy properties as-is with cash in areas in which multifamily zoning is approved. I get letters every week from people asking to buy my house. It's annoying at this point. So I've learned a few things by observing my neighbors sell and by asking around to professionals.

1. Some developers will say that the transaction will be painless, only to tie your home up in pending while they perform feasibility studies, then end up bailing on the transaction if the numbers don't work or negotiate the offer price way down once they have control over you with a contract. So be careful with their contingencies and protect yourself from a long feasibility period so you don't get stuck with another mortgage payment while the developer is taking their sweet time. They could also try to tie up your home as pending in order to make your place look like it's been on the market a long time, thus making it less desirable for other buyers.
2. If you put your house on the market the market will determine the value of your home and that is in your best interest especially if you can get in on the local MLS without hiring an agent. I'm not sure if you can do this in Boston, but we do it in WA and CA at Faira. In a hot market you want as much competition as possible to drive up your home's value. Developers are welcome to compete!
3. Developers don't mind losing earnest money deposits because it is a small drop in the bucket compared to the amount of money they drop on redeveloping your lot. You can ask for a higher % of earnest money or ask them to release it to you with no strings attached during signing of the PSA to show that they are indeed serious.
4. It may sound like I hate developers but I don't. I respect their negotiation tactics! Make sure to protect yourself when dealing with professionals since they know what will work to drive their business. It is unemotional and impersonal for them to buy a house. Make sure you are just as ruthless about your needs too.