Author Topic: Private Sale- what to propose?  (Read 1302 times)

parkette

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Private Sale- what to propose?
« on: June 11, 2016, 05:11:05 AM »
We own several single family homes in our home city in small town Canada. I recently received a couple of calls from someone interested in purchasing one of our homes.

We've been following a buy and hold strategy, but this is the least performing of our properties. We've always had the idea in the back of our minds that we would sell this one, but at the same time periodically invest in the property. For example, a couple of months ago we installed a new oil tank.

The potential buyer is very motivated as she owns the property next to ours, as well as a business whose parking lot wraps around the two houses. She would like to knock down the two houses to expand the business.

The first offer she made was lowball and I pretty much ignored it. She offered the market value assessment from our property tax, in cash, but in our town this is far below the market value. This offer was about $75,000 where I estimate the current value at $110,000- and we still owe $82,000.

She called again a couple of days ago to push us to make a proposal. They would like to tear the house down, they have an offer from a contractor to do a 2-for-1 tear down, and apparently the co-owners of the business have some cash to spend. She admitted the original proposal was too low.

So she told me far too much in her call and I recognize that we are in a significant position of strength. We also don't *have* to sell, but should given it's not a great investment property. This is great, because from their point of view the only motivator for us is the right sale price. It's a great opportunity and I want to maximize the potential sale.

These are the details:
Appr market value: $110,000
Purchase price in 2012: $84,000
Mortgage advance for renovations in 2012: $12,000
Mortgage principal remaining: $82,000
Rent: $1,100/month
Profit after all expenses: about $150/month
Mortgage maturity: March 2017
Early discharge fees: $800

What would you propose?



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pbkmaine

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Re: Private Sale- what to propose?
« Reply #1 on: June 11, 2016, 09:18:12 AM »
Market value.

ender

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Re: Private Sale- what to propose?
« Reply #2 on: June 11, 2016, 09:23:17 AM »
Why are you estimating the market value at 110k?

Is that the "what I think I could get" or the "this is what comparable places have consistently sold for" value?

When is your rental lease there up? Will you have any problems selling with this?

parkette

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Re: Private Sale- what to propose?
« Reply #3 on: June 11, 2016, 09:30:27 AM »
Why are you estimating the market value at 110k?

Is that the "what I think I could get" or the "this is what comparable places have consistently sold for" value?

When is your rental lease there up? Will you have any problems selling with this?

We had it appraised when purchased at $98,000 and the market has appreciated at about that rate since then. I don't have access to comparables but will have it appraised again next week. So this is a guess for now.

We're on a month to month lease with our tenant, so it's not a barrier to sell.

parkette

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Re: Private Sale- what to propose?
« Reply #4 on: June 11, 2016, 09:33:40 AM »
Market value.

I don't see selling at this price very motivating, unless an appraisal shows it to be worth more than my estimate. However, we're not planning to put it on the market at the moment so in this instance isn't the value to the buyer where our motivations might meet? Our house is the last piece of their puzzle.

Jim2001

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Re: Private Sale- what to propose?
« Reply #5 on: June 11, 2016, 12:59:12 PM »
If price is your only motivator and it's the last piece of someone else's puzzle, then you should get a premium.  End of story. 

The question is how big a premium do you want to hold out for?