THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Saturday, December 31, 1994 TAG: 9412290288
SECTION: REAL ESTATE WEEKLY PAGE: 02 EDITION: FINAL
COLUMN: About the Outer Banks
SOURCE: Chris Kidder
LENGTH: Medium: 95 lines
When I decided to buy land, I thought any complications would be of my own making. Last week I wrote about deciding which lot I wanted to buy.
Once that decision was made, the biggest hurdle, I imagined, was deciding what I was willing to pay.
To offer a fair price for the lot, I needed more information. Some of it was available from the real estate agent, but I was on my own to dig for the most important pieces.
I didn't expect the agent to provide all the information I needed because her job was to get the best price that she could for the seller. I had opted for a conventional agency relationship where ``my'' real estate agent was, in fact and by law, an agent for the seller.
The rule seems clear enough: Buyers, don't talk price with the seller's agent. But many buyers just don't get it. They ask agents what prices should be offered; they tell agents what their top prices will be.
Even though I knew better, I found myself asking about the ``general'' expectations of lot sellers. The agent's answer was perfect: ``In your price range, there's not much room for negotiation. Sellers expect to get full price.''
The agent provided prices for lots listed through the Board of Realtors' Multiple Listing Service. Some lots sported ``For Sale by Owner'' signs and I called each of the phone numbers posted and asked the price.
I was not surprised to learn these FSBO lots were priced higher than neighboring MLS properties. Like hundreds of others who bought land during the 1980s real estate boom, these owners were determined to sell at a profit that simply wasn't possible in today's market.
I called the county tax office for current tax assessment values in the subdivision. These assessments have little to do with fair market value but they help put prices in perspective.
Asking a price is one thing, getting it is another. The fair market value of most properties is found in the actual selling price. I needed to know the prices at which neighboring lots had been sold.
I called a local businesswoman who compiles computerized records of property transfers. For a reasonable fee, she provided me with the recorded sales price of each property sold in the subdivision where I wanted to buy. The report covered the last two years and included the names of each seller and buyer.
This information is public record and can be looked up at the courthouse for free. I've done it. It's much easier to pay someone to stroke a few computer keys and print the report for you.
The report showed me that not one lot had brought the asking price in the last two years; six recent sales had been closed at prices from 15 to 30 percent under the asking price.
I offered $4,000 less for the lot than the seller was asking. The seller countered with an offer $500 under his original asking price. He said he had an agreement with the subdivision's developer not to sell under that price.
Because I had the property transfer report, I knew the developer sold lots for less. We settled on a $3,000 reduction.
I accepted the seller's offer to finance the sale and ended up with a better interest rate and other savings totaling several hundred dollars. Just when the deal was sounding good, the problems were about to start.
Closing was set for no later than Oct. 31, one month after I submitted my offer to purchase. It would be mid-December before the lot would be mine. Every snag was title related.
Because it was an owner-financed sale, I didn't have to buy title insurance or have the property surveyed (my lawyer recommended both). I decided to postpone the survey until I was ready to build.
Without a survey, I couldn't get full title insurance. Because the subdivision boundaries were straight lines and surrounding lots had been surveyed without finding errors, my title insurance covers only defects in the title not related to the size and location of the lot.
When my lawyer did a title search, she found problems. The seller had sold the lot three years ago; the new owners defaulted. The deed had been signed back to the seller but had not been recorded.
When the deed was finally recorded, the property turned out to be owned by a partnership of several people in addition to the two sellers who accepted my offer to purchase.
The sellers had power of attorney for the partnership, but couldn't find the paperwork to prove it. The title insurance company wanted proof.
If I'd cut costs as many owner-financed or FSBO buyers do and left the paperwork to the seller, if I'd decided to wait on title insurance, some of these things might have been overlooked. Years down the road, sorting out who owned what might have been expensive or even impossible.
As it was, I waited two nervous months while interest rates climbed (although my seller was locked into our rate) and I faced the possibility of starting over from scratch.
But on Dec. 14, my lawyer finally had the required paperwork in hand and I owned property again. Of all the real estate purchases I'd made, buying this one empty lot took longer and had more problems.
Who says raw land isn't complicated? MEMO: Send comments and questions to Chris Kidder at P.O. Box 10, Nags Head,
N.C. 27959. by CNB