Letter to convince the vendor to sell cheaper

[Evad]

The vendor wants 200k + for 800 sq metres. Maybe worth around 180k I’m willing to pay between 150k and 170k, however I want to put in writing an offer that is valid for 1 week (or something) explaining (justifying or convincing) the vendor that my offer is realistic. Never done this before but something like this maybe.

I Would like to make a formal written offer on the vacant land located on the corner of blahblah and blahblah streets for $155,000.

The bases of my offer is as follows.
1. The property would require full fencing
2. The ground is uneven and would require levelling before a structure may be built or placed on the land.
3. Substantial growth and a number of quite large trees would have to be cleared and removed.

And then maybe something about how bad the economic climate is and where property is expected to go, first homes buyers... I don’t know..
Anyone ever done this before and is it plausible or rude – I don’t want to be rude. Any Ideas?
Please help
Thanks in advance
EVAD

 

[auror]

Evad, I wouldn't give too much justification as after a while it becomes a bit too try-hard.

Short and straight to the point would be ideal. Your 3 points there are enough, I think.

 

[csc]

Personally id tear it up when i received it..

I have had far better luck making personal contact with the owners face to face...............throw on a little charm, sus them out, get a feel what their situation is, they maybe desperate, they not not be.......

i wouldn't waste my time with letters, they are too easily ignored and deservedly so in my opinion.

approach them face to face, be friendly, open and honest, keep your cards close to you until you find out what their situation is then go in hard, especially if you have cash......

if your wanting to use the land for units, do not mention that at all cause you never know how that will go down...

good luck

 

[Propertunity]

What csc said x 2.

Letters are fine when you are bulk mailing to find a single property but not when you're trying to negotiate the property IMO.

 

[wylie]

The vendor wants 200k + for 800 sq metres. Maybe worth around 180k I’m willing to pay between 150k and 170k.

I Would like to make a formal written offer on the vacant land located on the corner of blahblah and blahblah streets for $155,000.

If you think it is worth $180K, maybe put yourself in their shoes and decide what you would do with the letter offering $155K .

I would be really insulted as a vendor, and would probably not deal with you again. I think when you go in really low, you risk getting the vendor totally offside. My mum had this happen quite a number of times when she was selling and she says a number of vendors would state "I will sell it to ANYBODY but that person, even at the price they offered." Let's face it, if they are so desperate that they have to sell it that much under its value, then they could sell it to a dozen people within a heartbeat, so at that low price, they could easily freeze you out altogether if you get their back up.

I am not one for screwing the vendor down in price to that extent, especially when you know the value, but realise that many others and, and do, do it. So I am not trying to judge you for the offer, but just make you aware that you could be shooting yourself in the foot by making such a low (and to them, insulting) offer.

If you think it is worth $180K why not go in at $170K and let them counter-offer. It is still more than $30K under their asking, and they may still not wish to deal with you, but at least at $170K they may give you the "time of day" and actually make a counter offer.

 

[evand]

How can you be 'open' and 'keep your cards close to you'? I thought they were mutually exclusive terms.

approach them face to face, be friendly, open and honest, keep your cards close to you until you find out what their situation is then go in hard, especially if you have cash......

Evad,

As for justifying your offer, pretty much all you can use is recent and local comparable sale prices and in your case that might be difficult. If the comparables DO stack up to what they are asking, just pay it or close to it and get on with your life. Don't nickle and dime them.

 

[Evad]

i wouldn't waste my time with letters, they are too easily ignored and deservedly so in my opinion.

I wondered this. Cheers

approach them face to face, be friendly, open and honest, keep your cards close to you until you find out what their situation is then go in hard, especially if you have cash......

And I don’t have cash. I have pre approved finance though. But am very cash poor at the moment and very new to this. To be honest I was only at the auction to be a little well not cocky but it was empowering and like I said “new to this” so trying to learn. I don’t know what I would have done if he said “sold @ 100K” I would have gone S**t and bought it I guess.
I think he is in a little bit of bother based on what the agent has said. He needs the money but don’t know how much. I can’t go on what the agent has said to strongly I guess.
It did go to Auction and like 5 people turned up and I was the only who made an offer of 100K the agent immediately took it to 150k (auctioneers offer) I think because I had previously offered this over the phone. Did the market speak here?
He doesn’t live there so I wouldn’t know how to get a hold of him and how do you “sus” him out.
If it’s ok what question would ask?

if your wanting to use the land for units, do not mention that at all cause you never know how that will go down...

Why is this?

So I am not trying to judge you for the offer, but just make you aware that you could be shooting yourself in the foot by making such a low (and to them, insulting) offer

Thank you heaps I have taken this onboard.

If you think it is worth $180K why not go in at $170K and let them counter-offer. It is still more than $30K under their asking, and they may still not wish to deal with you, but at least at $170K they may give you the "time of day" and actually make a counter offer.

This does sound like a good idea, however I won’t be able to build anything on it for a while so I will need to look the repayments of holding it for a while.

Thanks again for the replies guys. A few different options there – is good 

 

[Perp]

Don't try and justify your offer; it just gets the vendor's back up and won't convince them. I'd reply to your points:

1) Duh - I never said it was fenced.

2) Not if you build on stumps.

3) The presence of the trees, like the absence of fencing, is readily apparent and was taken into consideration when pricing the property.

Just offer what you're willing to pay, because ultimately, that's the only thing that matters. They really don't care what your reasons are.

 

[Evad]

HAHAHA
Well said ozprep
Thanks for that.

 

[Gremlin]

Okay, for me your second post changes it a bit from the first.

Am I right in interpreting...

You made an offer for $150k over the phone which was rejected.

You then bid at auction for $100k. There was a vendor bid at $150k and it's been passed in. Now up for sale advertised at $200k+.

The thing that's changed for me is that you've already shown your hand twice on this property. That's not necessarily a bad outcome, but it does limit your bag of tricks going forwards. Also, you know a lot more about the property than you may have otherwise by virtue of the auction.

What's been the timeframe between your offer and the auction and now? Does the REA view you as being 'too keen', 'interested' or 'opportunist'? Timing can have a big impact on that. Also, how badly do you want it?

Assuming you're not coming across too keen I'd personally have no qualms about going back with an offer below $150k, especially if you can be confident that there's no one else in the market for it.

You've already set a price expectation at $150k. It was rejected prior to auction, which is probably fair enough. If I were the vendor I'd want to see if I could do better at auction. But with the vendor having failed at auction, testing that $150k price for negotiation is pretty reasonable IMO. And, if I was trying to play hardball, given it had failed at auction I'd personally be going back at less than the $150k - you know a lot more about the market for this property now than when you made your first offer (especially if the agent is giving you signals that the vendor needs to sell quickly).

If it were me, I'd be prepping the REA with your points re levelling, clearing and fencing, not in absolute terms but by benchmarking against another property I may be considering (whether you are considering or not). Also, I wouldn't be doing it directly, more through a series of off the cuff comments.

And finally I think a week is too long. If the vendor is under pressure, I'd be giving them an extra dose of stress for good measure - have them make a decision within 48 or 72 hours - if there are other potential buyers they may not be able to respond within that timeframe and you take them out of the equation. (Although, I'd want to be closer to unconditional finance than you are before I would pull this lever)

 

[csc]

How can you be 'open' and 'keep your cards close to you'? I thought they were mutually exclusive terms.

easy if you have bought and sold anything and everything as much as i have over the years..........courtesy plays a major part while trying to negotiate a sale.

by keeping cards close to you i mean sus them first before gobbing off and offering a ridiculous price straight up...

i can think of nothing worse than someone knocking on my door and saying im joe blow, i want to buy your block and i have X amount of money, no more.........take it or leave it!

a kick up the ar$e is what should happen next!

ask "open ended" questions.....give nothing away until you are satisfied except for courtesy and to listen........when its time make a serious offer and try to close the deal quickly if accepted.......its not diffucult mate....you gotta play the game, manners goes a long way even today...but be smart.

 

[evand]

Mate, i sort of agree with you. I've been in business and investing a long time. I just don't think you can be open AND keep your cards close to you.

easy if you have bought and sold anything and everything as much as i have over the years..........courtesy plays a major part while trying to negotiate a sale.

by keeping cards close to you i mean sus them first before gobbing off and offering a ridiculous price straight up...

i can think of nothing worse than someone knocking on my door and saying im joe blow, i want to buy your block and i have X amount of money, no more.........take it or leave it!

a kick up the ar$e is what should happen next!

ask "open ended" questions.....give nothing away until you are satisfied except for courtesy and to listen........when its time make a serious offer and try to close the deal quickly if accepted.......its not diffucult mate....you gotta play the game, manners goes a long way even today...but be smart.

 

[john]

Vendors in my experience do not give a fig as to a purchasers reasons used to justify an offer. The block will probably sell for what comparable sales indicate it should sell for - other things being equal. Give it your best shot and save your letter writing!

 

[Evad]

You made an offer for $150k over the phone which was rejected.

Correct

You then bid at auction for $100k. There was a vendor bid at $150k and it's been passed in. Now up for sale advertised at $200k+.

Correct he wants 230K

The thing that's changed for me is that you've already shown your hand twice on this property. That's not necessarily a bad outcome, but it does limit your bag of tricks going forwards. Also, you know a lot more about the property than you may have otherwise by virtue of the auction.

Correct. I have seen this land sell once before since I have lived next door (little secret) 4Years

What's been the timeframe between your offer and the auction and now?

Around 2 weeks. Auction was last Sat

Does the REA view you as being 'too keen', 'interested' or 'opportunist'? Timing can have a big impact on that. Also, how badly do you want it?

In my opinion interested. He has responded to both my offers and approached me on Monday to let me know that it was now on the market. I do want it because it is next door, 800 sq mtr, corner block, heaps of potential for someone with the cash to develop assuming I can’t or don’t.

Assuming you're not coming across too keen I'd personally have no qualms about going back with an offer below $150k, especially if you can be confident that there's no one else in the market for it.

Well I guess he has already said he won’t accept 150K so I could walk and hope he comes back after no one else offers and how can I be confidant that no one else is? I was just judging by the turnout at the auction really.

You've already set a price expectation at $150k. It was rejected prior to auction, which is probably fair enough. If I were the vendor I'd want to see if I could do better at auction.

I think he did this and I agree.

But with the vendor having failed at auction, testing that $150k price for negotiation is pretty reasonable IMO. And, if I was trying to play hardball, given it had failed at auction I'd personally be going back at less than the $150k - you know a lot more about the market for this property now than when you made your first offer (especially if the agent is giving you signals that the vendor needs to sell quickly).

If it were me, I'd be prepping the REA with your points re levelling, clearing and fencing, not in absolute terms but by benchmarking against another property I may be considering (whether you are considering or not). Also, I wouldn't be doing it directly, more through a series of off the cuff comments.

And finally I think a week is too long. If the vendor is under pressure, I'd be giving them an extra dose of stress for good measure - have them make a decision within 48 or 72 hours - if there are other potential buyers they may not be able to respond within that timeframe and you take them out of the equation. (Although, I'd want to be closer to unconditional finance than you are before I would pull this lever)

So I guess it may be worth trying to talk to the agent “off the cuff” about the potential issues preparing the property for future development.
I have pre-approval. Is this not the same thing? I was assuming I enter into a contract then go to the bank and tell them I need my money they have approved me for? No?
Thanks to Everyone again – putting heaps in my head

 

[wylie]

I must be going mad..... I have just read this thread again trying to find what I was looking for, but cannot find it. I thought you put on the land size of where you live (next door), but perhaps I am thinking of another thread.

If you do live next door, and the two blocks together would enable you to put on more townhouses (or whatever you wish to develop down the track) then I would not be taking the risk of insulting the vendor with lowball offers. If this corner block itself can be developed, it will be attractive to someone who may want to develop it. You risk having townhouses plonked next door with no control over their design or the loss of your privacy.

Therefore, I reckon that makes you an "over-anxious buyer" in the eyes of the agent. If the agent knows you live next door, he probably will let the vendor know that (maybe not).

Anyway, if the two blocks together are able to developed and the larger size means you can put a bigger development on down the track, I would be trying to get the deal together, and that may mean paying close to market price.

When the house over the back fence to one we already hold came on the market, it was priced at $650K. It was worth probably mid $400K. I looked at it, but even though it would have meant a big double block with two street access, we were not prepared to pay $200K over the odds for it.

A year later, it was with a different agent and I went through again, not really thinking it was a goer. There was one offer that had been presented to the vendor for $450K. Vendor had countersigned at $470K but the purchasers were having a think about it.

We slipped in a cash unconditional offer of $460K and they accepted it. They were motivated due to the owner going into a nursing home and they wanted it done and dusted.

Even though we cannot move either of the existing houses (which is rather a detraction) we still have a large block with two street access. The block next door will be having another house put in the back yard, but with us having the double block, we should be able to put in three townhouses.

Sometimes it is worth paying market value because for YOU there is a better use for the two blocks together.

If you miss out on this development opportunity over trying to lowball the vendor, you may regret it.

Just my thoughts.

 

[Evad]

Thanks Wylie. So many options.

Off subject. How is one supposed to get ahead? I couldn’t get that kind of funding. The bank wouldn’t lend it to me based on my income.

Westpac has pre approved me 220k based on a %20 deposit. I have 20k maybe 30K in my existing property which isn’t even 20% of 220K ANZ has the deposit based on equity covered as to avoid cross-colaterization.

Even if I did get the land for 160K the deposit required by the bank will still be insufficient and then that is probably the max I could actually afford to hold cutting right down my living expenses to make the payments and we haven’t even thought about building on it yet.

How is someone supposed to start out with the (in my opinion) ridiculous prices these days. All these young people buy a place for 400K +. Loose thier job and they are stuffed.

The average wage is not what they advertise. I’m on 45k
Sorry my little rant.

But yes I do have a vestured interest in this particular piece of land.

ahhhhhh
Thanks again all

 

[battler]

If you miss out on this development opportunity over trying to lowball the vendor, you may regret it.

But if you miss out, the new owner might be interested in buying yours for the same reasons, and then you get the choice as to whether you will accept a lowball offer.

 

[cu@thetop]

If I was selling and knew you owned the lot next door I would jack up the price to you- why? because you already have a level of commitment to the deal the other buyers don't have .

Won't come on the market again for a while so make a move soon.

 

[Evad]

If I was selling and knew you owned the lot next door I would jack up the price to you- why? because you already have a level of commitment to the deal the other buyers don't have .

Won't come on the market again for a while so make a move soon.

So how do I get a reasonable price if this were the case – He may know that I do live next door but I’m really not sure. I may have to find a JV and pay close to what he wants.

 

[Propertunity]

Westpac has pre approved me 220k based on a %20 deposit. I have 20k maybe 30K in my existing property which isn’t even 20%

So in essence you are saying that you can't get the finance.

Even if I did get the land for 160K the deposit required by the bank will still be insufficient and then that is probably the max I could actually afford to hold cutting right down my living expenses to make the payments and we haven’t even thought about building on it yet.

So in essence you are saying that you can't get the finance and even if the vendor dropped the price to $160K you still can't get the finance. Even by some miracle if you did then you cannot afford to build on the land anyway. Evad - what's the point?

How is someone supposed to start out with the (in my opinion) ridiculous prices these days.

Evad, the prices are what the prices are. Plenty of other people pay these prices - that is why the market sustained at what it is and is not falling 40% or whatever.

All these young people buy a place for 400K +. Loose thier job and they are stuffed.

Anybody who relies on any kind of wage and loses their job is stuffed no matter how much they paid or whether they are young or old. What's your point?

The average wage is not what they advertise. I’m on 45k

The average wage is $84K odd. It is the average - take the highest paid CEO/Exec on a few $M and the lowest paid on whatever poor people get paid and everything in between and divide by the total = average.

Either find a way to make more than below average, invest in areas where you don't have to pay $230K for a block of land, take on a JV partner who can work with you or lower your expectations. There is no point cursing the darkness.

Sorry if this seems a little harsh but ........a dose of reality is good for the soul.