What To Do When a Developer Knocks On My Door

01-05-2017



What To Do When a Developer Knocks On My Door


In areas with a lot of development going on and where raw land is scarce, developers search for older homes to tear down, and may solicit homeowners to sell directly to the developer rather than putting the home on the market. Since most homeowners are not aware of the current value of their homes and they don’t know current market trends or the developer’s plans, they run the risk of saying “yes” to a too-low price.



If a developer knocks on your door and wants to buy your property, here are some things to consider:



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1. Know your home’s value.

Typically, developers will pay less than you might otherwise get by selling to someone who wants to live in your house. Even given the cost of a tear-down, developers can sell the redeveloped property for 3-4x the value of the existing home… and their profit will only increase if they buy your home for less than its current market worth. And they will try!



What you can do: get a comparative market analysis from three different real estate professionals. Ask whether it’s worth doing any improvements or renovations that can help you get a higher selling price by selling to prospective homeowners rather than to a developer. Keep in mind if other homes in your neighbourhood are being purchased for tear-down, the renovation you will need to do to sell your house to a homeowner will be significant and costly because prospective buyers will compare your older home with the new homes.



Have the agents tell you what price you can expect for your house if it is a teardown, DIY reno, or “as is” sale.



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2. Don’t give them a number immediately.

The developer has already determined current fair market price and may be very good at making you think that you’re getting a great deal by taking their offer. Don’t fall into that trap. Figure out the numbers you would “like to get,” “could live with,” and “won’t go lower than.” DO NOT give them a number before YOU figure out those numbers for yourself!






What you can do:


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• Consider the lifestyle implications of saying no: are you willing to stay despite whatever development is going on? For example, if your location is being turned into denser housing, are you okay with more traffic, less open space, and perhaps looking at a development that bothers you aesthetically?


• Consider the costs and hassles of moving and the cost of finding another place, and factor that into your “no less than” price.

• Open your negotiations by finding out what their starting figure is. If it’s near your “like to get” or “could live with” price, you’re off to a good start. This is probably unlikely, though, given that developers usually bid low.



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It’s in your best interests to work with a professional who has your back, who will guide you in making the best decision given the situation, and prevent you from naïvely settling for a price that – at face value – appears to be a windfall for you, but in reality is a bargain for the developer.



You have as much power in these negotiations as the developer does. Quite simply, developers want your land, but they do not get to dictate the rules of the game, no matter how persuasive they are… you do not need to be pressured to accept their initial offer, and you don’t even need to be pressured into making a counteroffer until such time as YOU have done your homework and you feel ready.



And if negotiation is not your strong point, and since you should expect a 30-50% higher premium for your property by selling to a developer rather than to a homeowners… get independent representation.





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