I’d like to buy a piece of land in Hawaii from the owner who is also a realtor. This is my first time buying real estate. What strategy should I use to negotiate the lowest price?
Is anyone familiar with how a Condominium Property Regime (CPR) works in Hawaii with regard to land? What are the drawbacks of such an arrangement?
I’m planning on living on this property for awhile before selling it.
Cash offer, fast close.
Cash offer, fast close.I'm curious about the cash offer thing. Why do sellers prefer cash from the seller over cash from a mortgage company?
If the list price is $700K and the most I’m willing to pay is $650K but I obviously want the lowest possible price, how should I proceed? What should my offer be? I also don’t want to insult him.
Because cash means you CAN close. A mortgage means you MIGHT be able to close if you get approved.
If you are not embarrassed by your initial offer, you offered too much.
jmd_forest
If you are not embarrassed by your initial offer, you offered too much.
How much would you offer on a 700K property if you’d actually pay 650K and you don’t want it to get away. It’s been on the market for at least a year.
first what is it really worth, what do the comps in that building tell you…
Lets just say for the sake of conversation its actually worth $650-675,and has been on the market for over a year, I would probable start just over $500k
first what is it really worth, what do the comps in that building tell you..
It’s a condominium arrangement called a CPR but it’s bare land. It’s a really common thing in Hawaii. It’s used to split pieces of land that can’t be split via subdivision.
Although I am not familiar with the specific market or instrument (CPR) you are describing, the “rule of thumb” for REI is to pay no more than 70% of FMV. Recently, more and more investors have reduced their buying criteria to a maximum of 60%. As noted by andydallas, the first step is determining a TRUE FMV for that property/CPR in TODAY’s market (not last year or what it might be worth next year, etc). I look at this is what price would it need to be sold on the open market to sell within 30 - 60 days. Longer than that and my opinion is you are simply waiting for the “bigger idiot” to come along and take a property off your hands. If its been on the market for a year for $700k and hasn’t sold, that should tell you that no one else considering buying that CPR believes it is worth $700K.
That being said, every deal must be analyzed on its own merits. If you are confident you can make a reasonable return on your investment (whatever YOU define as reasonable) while buying at a higher price…go for it.
jmd_forest
It looks like I won’t have the money for 6-10 weeks pending sale of another property at auction. Would you wait the 6-10 weeks to make an offer, or make an offer now stating that the transaction can not be completed for 6-10 weeks? I’d don’t want this property to get away.
Hi reiclubrocks…
From reading your posts, it looks like you are trying to buy this to live in and not as an investment. You even mentioned that you plan to live in it before you eventually sell it.
While there are many investors that will want to get a great price and/or terms on the property they live in as well, when negotiating to buy a home that you really want to get because you’re planning to live in it, it can become much more emotional and really alters, in my opinion and experience, your negotiating position.
When evaluating investments it is largely about the numbers. When buying for a place to live in, it is much less so.
I hope that helps at least a little.
Thanks James, that is helpful. I will live there for a while but not forever and I need to get the lowest price I can. This is my first time buying property and I appreciate everyone’s help.
You are very, very welcome. Glad I can help.
If it really is an investment property you need to negotiate from a place where you’d be willing to walk away if you don’t get a price that meets your investment criteria.
If you’re living there, that’s a very different situation.
If I can help in any other way, just let me know.
I’m worried that if I wait until I have cash in hand, the seller may have already accepted someone else’s offer.
Should I tell him that I’m waiting to make an offer until I sell my other property so he at least knows someone is interested and he shouldn’t accept any lowball offers?
Alternatively I could make an offer contingent on the sale of my land?
Yes, a contingent offer makes sense on this one (if you’re planning to live in it).
If you’re buying at a big enough discount, making a cash offer (with no contingency for financing) where you know you’ll come up with the money from other sources if your land auction does not close in time is worthwhile. For a property you are NOT getting a big enough discount on and that you would be willing to walk away from if the financing does not come through then you will want to make it contingent.
Let me know how it turns out. You got me interested and I want to see how it all ends up.