Reader Question: We have some property in a popular vacation area where we are building a cottage. Soon it will be finished. We bought the lot six years ago. The lot next to us just came up for sale. We think it is best to buy it for our overall property value. Based on comparable sales and an appraisal, it is worth 44-50k. They purchased it three years ago for 38k. Now asking 64k. The family owns property on the other side of the lot they are selling, so we will be neighbors. Because we have the lot next to them, we feel like they will expect us to pay more. What strategy will help us buy the vacant lot next door?
Monty’s Answer: Negotiating strategy is challenging to determine in any negotiation. Strategy is more challenging when trying to buy the vacant lot next door. The many variables in the minds of each participant are often unknown. Motivation, preconceived negotiating notions, financial position, honesty, emotional status, and common sense all come into play. With this caveat, below are some suggestions for you based on the information you provided.
Circumstances to consider
The salability of the lot. Why are they selling? How well you are acquainted. The current neighborhood lot market. Your motivation to acquire it. The effect of the purchase on your finances.
Your options
- Wait for some time to pass – The risk is someone else buys it. The lack of demand favors you. If your value assessment on the lot is correct, it may sit there
- Make an offer now for what you would be comfortable paying (sounds like under 50) – The risk is you insult them (limited risk). The value is you have lost nothing if the seller does not accept. If they are selling because they need cash quickly, you may prevail.
- Make an offer a bit higher than you want to pay – The risk is if they accept you might have been able to buy it for less. The value is you acquire the lot, or if they reject, you have lost nothing. They may even come back with a counter-offer you like.
- Pay the asking price to eliminate any risk – Average this purchase with your initial lot price. Avoiding the risk of losing the property is more valuable to some than the extra cost.
Wild cards
The real estate agent is likely to be on your side and urge the seller to take whatever offer you make. They see the same comps you do and know the seller’s price is high. The seller may also see that the price is high. It is a low commission sale. Unfortunately, many agents don’t like to spend much time on them. Agents take small commission listings because they sometimes lead to high commission transactions. No matter what you offer, be careful what you say to the real estate agent. For example, you ask the agent, “ Do you think the lot may be a financial burden?” The agent translation to the seller, “ They wonder if you are in financial trouble.” Agents can sometimes accidentally throw fuel on the fire with an inaccurate comment to the seller. Here is an article about negotiating you may find helpful at https://build.dearmonty.com//negotiation-for-home-buyers/.