Reader Question: My property on the east coast has been re-zoned to high density. I have received many solicitations from real estate developers. I suspect that they do not have my best interests in mind. What agents-real estate attorneys, must I consult?
Monty’s Answer: My interpretation of your question is that you want help determining the new value of the property. The fact that the rezoning has created interest that did not exist before the zoning change suggests developers see an opportunity to add value to your property and that a demand for such improvement exists. We can assume they are coming because the property is in a desirable location.
Strong demand bodes well for a seller.
Not all zoning changes attract “many developer’s representatives.” Each of them will have clients that operate differently and may have different ideas for developing your property. Your city’s ordinance suggests your new zoning allows structures seventy feet in height and requires some affordable housing. The ordinance also encourages development that seeks additional height and alternative development standards governed by a development agreement.
Factors that influence value
The physical shape, size, topography, current improvements, and physical location are essential property considerations. Additionally, neighborhood characteristics, municipal zoning codes, demographics, political climate, and more, play a role in value.
The folks that are contacting you and identifying themselves as developers representatives can fall into one of four distinct categories:
- The company seeking to buy your property employs them.
- They are retained as a buyer agent by a company trying to buy your property.
- They have a prospect they believe will buy your property.
- They are a member of a buyers group.
They will likely be licensed real estate brokers or sales agents. Which of them holds the key to the customer who can attain the best price for you is unknown at this juncture. Make sure any Letter of Intent (LOI) agreement is clear on your fee obligations.
Every seller has different life experiences, risk tolerance levels, property knowledge, and time constraints. At some point in determining the value of the property, you will want professional assistance. Where that point lies is up to you. It appears from the current circumstances there are four ways to seek opinions about the value of the property:
- Obtain multiple views from qualified commercial real estate agents.
- Engage a qualified fee appraiser.
- Ask the developers representatives what they will pay.
- Enlist opinions from some or all of them.
- Contact several commercial real estate agents. Find them by checking out “for sale” and “sold” signs in your area. The type of properties they handle is one way to check them out. Do an internet search for commercial real estate agents. Commercial agents often specialize in categories such as land, business rentals, business opportunities, so identifying them by specialty is essential. If they do not work in development land, they may have recommendations. Three of them will offer different value conclusions. Based on comparable sale data, and written analysis, you can gain a sense as to which opinion seems most attainable. They will likely provide this data free of charge.
- Contact a commercial fee appraiser. Appraisers with designations, such as MAI, NSREA, or others have invested in real estate education beyond your state’s requirements. These appraisals are often more intensive and involve several approaches to value, appraiser requirements (such as visiting comparable sales) that agents opinions do not require. This type of appraisal is likely considerably more costly than a home appraisal. In my area, they are typically thousands of dollars. Each appraiser will value their time differently, so if you choose this route, it pays to shop around.
- Respond to the developer representatives. They will all have different offers. These folks are likely the people the agents are looking for, and they know what the appraisers and real estate agents know. Ask them to provide comparable sales data to justify their proposal. Some prospects are very experienced and financially stronger than others. Some will be more likely to close the transaction than others. Attempt to arrange a meeting in their office as one way of judging their operation.
In all cases, after you have gathered information from any or all of these sources, you should not sign any documents without consulting with your real estate attorney. If you are not inclined the engage in this exercise, consult with your attorney or some other knowledgeable person for their opinion.