Let me set the stage for you:
Small ~50 site subdivision in the far west suburbs of Detroit. Average of 2250 sq. ft, $325,000. First homes (the models) went up some 5 years ago. 7 lots remain empty. Models are for sale (and have been for nearly a year). Check with the county assessors office shows builder is 2+ years delinquent on taxes for models. Hasn’t paid taxes on vacant lots in last 5 years.
Since this sub was first begun, builder has been the same actual guy, but several different corporations / legal names. Such as ABC Homes / ABC Properties / ABC Builders / ABC Development, etc, etc. And left a wake of unhappy people and unpaid bills with each name change. Fact’s clearly point to him being in trouble.
Make no mistake about it, though I’m a homeowner here, the builder and I are (whether or not he realizes it) on the same side and after the same thing. I presume he’d like nothing more than to be done with this sub. And I’d like it built out and cleaned up. With real neighbors instead of tyvak wrapped shells and weeds and trash.
Two of the completed and previously sold homes are now vacant with people having lost their jobs and transferred away looking for work. These homes are not (yet?) in foreclosure, and are being maintained with “For Lease” signs out front. But asking price is $1500+/month. In this economy fat chance of people paying that. But that’s the minimum needed to cover the mortgage / taxes / insurance / etc. So foreclosure seems a matter of when, not if. And I sure hope (but have little confidence) that these 2 vacant homes are the end of the story. But there are probably a few more neighbors with adjustable rate mortgages that will find themselves priced out of the neighborhood. And upside down due to no money down purchases a couple years ago when the auto industry hadn’t collapsed.
I mention the plight of these already sold homes to illustrate the problems the builder-developer certainly faces in trying to sell the balance of the homes.
Anyway…….. one of the 7 lots left unbuilt, is immediately to the west of me. And there’s an occupied home immediately west of it.
My thoughts, always looking for the proverbial win-win solution, split this empty lot with the homeowner to it’s west!
What’s in it for me? Bigger lot. Permanent “buffer” to the next neighbor over. Room for an addition (2 car side entry garage with a workshop and an unfinished bonus room upstairs).
What’s in it for the neighbor? Bigger lot, permanent buffer (to me, not that I’m a bad guy, or anyone that might come along after me),
What’s in it for both of us? With us owning the lot, maintaining it becomes much more palatable. We’d be rid of an eyesore.<!—-><!—-> <!—->
What’s in it for the neighborhood? One less eyesore.
What’s in it for the builder? Profit from selling this lot, He’s that much closer to getting out of this sub altogether, potential profit from the addition I’d like to build, if I were to use him, but the merits of that remain to be seen.
Drawbacks:
Entire sub (technically a condominium development, as are most new subs around here) was built on ~25 acres, a parcel of property that was platted for this use and split some 6 years ago. To split this lot renders it “unbuildable”, which is great by me, but normally the City isn’t interested in giving up the possibility of a buildable lot that would be generating tax dollars when built out.
My questions:
Anybody heard of doing this; Splitting a lot with the other adjacent neighbor?
Any heads up for dealing with the city, as I’d pursue this?
Cost of lot’s were never broken out or detailed, but baked into total price of homes. Any ideas on where to start in determining an honest value for the lot to make an offer to builder/developer?
Would my thoughts of using him to build addition be well received? To cushion the loss of potential profit were he to sell the lot and build a home on it?
I’m sure the builder would do this in a heartbeat, if he could realize the same profit that he would have made by selling a completed home. But I’m clearly not going to do that. Like anybody else, in these economic times, I’m looking for a deal. Not necessarily a steal.
Does conventional Breaktime wisdom suggest I’m looking at way too much hassle for any value I’d ever get out of this?
If getting the lot comes to pass, I’ll post some pictures of my home with the proposed addition sketched in. And then we can have some fun.
Thanks,
kgregor4
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Replies
Bump...
Talk to a realtor or assessor, but I'm pretty sure the added half lot will not add half the lot's cost to the value of your home. This may not matter to you, but you should if this is the case.
Unless you would consider buying the lot alone, why not talk to the neighbor first to see if there is any interest. If you both need the other to bear the financial burden, then your purchase agreement needs to include you both.
Check with city zoning/planning, will they alow it to be split? If so, you may have to pay to have both lots replated and added to your own before you can build on them. Get any assurances in writing. Don't take the word of some guy who say's "yeah, you can do that". There are often more layers of city government to go through before you have a final OK. You could check with the building department.
Ask the builder. You never know how he might react. If he knows you are aware of his tax delinquency, he may get defensive. Or, he may welcome your offer.
I guess I would start with the neighbor or the builder. Do the city stuff last. You don't want someone from the city to speak to him about the lot he doesn't know he's selling.
Oh, remember those back taxes, someone has to pay them. I can't stress the importance of making sure you go through all the layers of government. More than one project has been stopped because some department was overlooked during the planning process.
As to whether it is "every done".
Yes, all the time.
The others make good points about how the city would handle it as a building lot or not.
As to value you might want to check with the county tax assors. So places value that they place for tax purposes is a reasonable appoximation of the market value. Other you would get better answers from a Ujii board.
But you might get it a lot cheaper. If taxes have not been paid in 5 years when will it go up for tax auction?
How tax auctions are handled vary a lot from state to state. Some you get title right away. In other the "former" owner can reclaim it for a period of time.
My questions:
Anybody heard of doing this; Splitting a lot with the other adjacent neighbor?
Yes, all the time, as Bill H. said. And for the same reasons that you want to do it.
Doug
You should post this to Blue, (although now that I have this reply screen open I have no clue as to how you would do that)
He's a framing contractor in your area who is also a real estate speculator PT.
He's probably got enough local knowledge, and maybe even specific to your development to help you out.
Joe H
Bump the Devil
I don't know if I have any answers on this one Joe.
Most of the subdivsions being developed nowadays are being done using the condominium act because platting a sub takes years longer. This affects the profitbility of the sub because of carrying costs.
The clause written into these condo documents are left up to the imagination of the developer and his lawyers. Some of these documents are thick books with lots of really dull reading. Remember..most lawyers survive because of their billable hours, LOL!
Anyways, I don't think the city has the right to prohibit a lot from being split. The re-alingment of property lines is quite common and would have to be allowed. In fact, there are laws written that allow it without opening the doors for re-assessment.
The best place to get accurate information would be at city hall or the township board office. The orignal poster shouldn't be afraid to go in and find out what they can do to help clean up that mess. The local authorities will usually be quite helpful in a situation like this, unless one of their cronies is already in the process of picking up some of the pieces in that subdivision.
The more important question about those lots is the financing. Who own the note? Follow the money...
blue
Its hard for me to believe taxes havent been paid in five years and it hasnt been auctioned yet. There has to at least be a tax lein against it now. My first step would be to see if it can be split. If so, make the guy an offer based on the assessed value of the lot and keeping in mind what your other expenses will be after purchase. Personally I would keep the lot in one piece to preserve its resale value.
Well from your story and what Blue has sad about you area;
I think you might as well be digging for gold in Arkansas.
You have to steal it and then you need the whole lot for several reasons . You probably have a covenant that says you cant sub divide a lot for building purposes. That could mean any building .
I think you are trying to sell your self the deal. It has plenty of minuses you failed to mention I can see from here in Ar.
Anyway its a sucker bet with out reseachiing it further.
I say hold your money in an interrest bearing account and wait for the guy to fold. You walk in at auction time ready to toe the line and place your bids.
Tim
and that's the voice of experience talking.
We can imagine something that only exists in our heads, in a form that has no measureable, tangible reality, and make it actually occur in the real world. Where there was nothing, now there is something.Forrest - makin' magic every day
Thanks for all your responses. A number of good points have been brought up.
At some point in the process I have to discuss with neighbor, builder/developer, City, etc.
And I think there may be a sequence that works best so far as having all my ducks in a row, before talking to the other party.
Think I'll start with the City, anonymously, and avoid getting into any specifics which would disclose the entire plan I'm contemplating. Just speak in general terms and listen and learn what they may have to say.
As to a fair value for the lot, no one's raised any sort of suggestions that. For example, a subdivision lot is typically 10% or 25% or whatever of the home placed on it. The lot is question wouldn't command any sort of premium (not lakefront, rolling, wooded, anything special) just your typical rectangular 12,000 sq ft (80 x 150) subdivision lot.
It sounds like prices are low and going down. I'd say forget about the split and the neighbor. Buy the whole lot when you can get it as cheap as possible. Hold onto it, and do some gardening. When the time comes to sell and move on, you have two properties, both the same size as the rest of the neighborhood's lots.
-- J.S.
Assuming the other houses in your neighborhood are of similar value to yours, I think you would have a very hard time recouping your investment money when you go to sell - weather you build a shop on it or not - but especially if you built a shop. Perceived value and getting a favorable appraisal for a bank loan for a potential buyer down the road are 2 different things.
Question - in your county/city tax records don't they state the value of the land and building separately? As Bill said that may or may not be a good indicator as to the land value.
Value of land and dwelling are not broken out separately in any records I've been able to find.
The unpaid taxes on the vacant lots reflect a prorated amount (~1/50th) of what the taxes were on the original parcel prior to it's being subdivided.
Coincidence I started this post yesterday, an interesting (if frightening) article in today's USA Today:
When General Motors sneezes, the saying goes, the nation gets a cold. But now it looks as though <!----><!----><!---->U.S.<!----><!----> automakers have the flu, and the <!----><!---->Detroit<!----><!----> real estate market is in intensive care. The symptoms: Nearly 7,000 homes, more than a year's worth, are up for sale; 7,422 homes in the county are in foreclosure (that figure swelled by 39% in July alone); and prices from January through June are down 6.6% from the same period last year.
<!----><!---->http://www.usatoday.com/money/economy/housing/2006-08-15-close-detroit_x.htm<!---->
http://www.usatoday.com/money/economy/housing/2006-08-15-close-detroit_x.htm
Thats part of what I was talking about .
They might as well start calling the area , Death Valley, Lost Hole , Bankrupt Estates , etc.
It will only get worse {or better ,depends on which side of the football youre on when its snapped] for the economy in the nation is suffering and should take several steps down. Its an opportune time to buy a nice home for 40 cents on the dollar comming shortly. Be there .
However thats not the only problems with the economy.
Tim <!---->
Edited 8/15/2006 10:16 am by Mooney
Its an opportune time to buy a nice home for 40 cents on the dollar comming shortly.
I don't know about that.
I spent the morning at the Oakland County (suburb of Detroit) sherrif's sale. They offered 130 new foreclosures... only one drew a bid. The lady bid 1$ more. She probably holds a second mortgage and is protecting her money.
That means that all of those houses were mortgaged so high that there wasn't any equity left in them to bother with.
Oakland county has some of the richest zip codes in the country and they are not immune.
I met with a realtor that has worked the foreclosure list for years and years. His only interest is to garner listings. He told me that there was one nasty old lady that regulary bought 500k worth of property at every auction. Five months ago, she threw up her hands and decided that it wasn't worth it any more and she hasn't been back since.
The high mortgages, coupled with refis has caused this upside down situation. The sellers in Michigan cannot list their propertys for less than they are asking because they'd have to take money out of their pockets to sell it. The agent told me that only the nicest properties, in perfect condition and location are selling if they offer a nice discount too. It's not really a discount...it's the fair market value but the abundance of overvalued listings is causing the sellers to think they are getting ripped off when they discount.
I've discounted 15% on my stuff with no offers.
I don't think it's a bargain and I don't see the state recovering any time soon. I'm thinking maybe in ten years or so.
blue
Its the next ones .
The first sherriff sale is to take it from the owners hand from default mortgage .
The first auction is really to declare it final from customers hands into the lenders hands. Its the last chance to redeem your house so to speak. Of course others can buy it but on the first one , it has to be sold to satisfy the lender with all fees included. Sometimes , it works if it has low equity.
Besides , Im not talking about now .
Then the lenders find different avenues to get rid of the properties . Several list them with realators. Others are put on sites . They start there for the appraised values and sit for a couple weeks to a month and then get lowered . Reverse bidding if you will ? Start high and come down till a bid matches. Some take lower bids than advertized. The end result is sort of like a silent auction. When it drops to a point it sells just like cattle .
I buy most of mine from US Marshal sales . They come to geter done . They list at half of appraisel and start the bidding . Sometimes the house doesnt sell or in the past I have been at a few that didnt recieve a bid . One was a termite house the appraisor never entered. They offered it again in 6 months and gave it away.
Blue there are too many different ones doing it. They are hard to keep up with when the forclosures hit the markets full scale . When interrest rates went to 10 percent and points for a short time there was a flood of homes . I bought 5 in a row and worked my azz off to hold on to them at 40 percent of market price compared to new construction. I rented them all out but could not pay everything with the rent. It was the interrest . I worked and paid the remaining untill rent got higher . I was able to breath a little then and then came the crash down to 5 percent interrest . I picked up 5 more before the higher prices hit with them showing outstanding gains. Prices are on its way down now . Figure your poision. I wont buy anything to keep till it hits bottom. On the other hand if Im going to sell somthing I dont want to weather the storm with , now is the last chance . Im not talking at all about your area.
Once the lenders get "loaded " with homes they will release them at what ever the costs involved . They will finally take a hit . Im gambling on it .
Tim
The value the excess land contributes to your property will most likely be less than 1/2 the value of a buildable parcel. By splitting the parcel you devalue it. You likely will not be able to recover your cost should you sell.
I'm not telling you not to do it. Just be aware that you may not be able to recover a larger percentage of the cost of purchasing the site.
I haven't read all the answers here since it is getting late, so someone has probably said this already. But here goes.
Lots are split between the two adjacent properties here in Columbus. Our lots are narrow (45') in my neighborhood. The vacant lots are from arson, neglect, etc.
Afterward, I suggest that you have your lot plus 1/2 lot re-zoned (or re-platted or whatever they call it there) so that you only have one lot. Everything from there on out will be easier.