OT - Negotiating Purchase Price

We"ve never purchased land before. I was hoping you guys might have some advice on what to look for when purchasing land, and some price negotiating tips.

Here"s what I know so far.
40 acres, 15 tillable, the remainder is low swamp land (no woods to speak of). Asking price is $135k. Taxes are $580/yr. Assessed market value is $100k.

It"s been on the market for almost 300 days (normal for this market). It"s an estate.

House
Septic system is out of code ($8k repair cost)
Older appliances - newer water heater
Windows are new
Maintenance free siding
Newer shingle roof
Wood furnace with backup propane wall heaters

Barn
No leaks in roof, but rafters are bowed heavily. in 3 places on either side of roof.

Foundation is okay
Glass in windows are broken

Machine Pole Shed
Seems good

Garage
Cement flooring is completely broken apart.

Thanks for any advice!

Colin, MN

Here are a couple of pictures.

...who is going to pay for "as is" problems? This could be a chip in your favor(lower purchase price).

...Repairs: you will plan and it will take twice as much time, effort and $$$ when its all said and done. ...Lead pipes? Asbestos(sp?)? minimal insulation? Solid foundation? ...old electric can get expensive to replace. ...time to buy new tools, esp if the wife is on board. HTH...good luck.....don t. ....

Thanks for adding your thoughts!
Colin

Colin

Thanks for the advice.
Colin

Good Luck, you wouldn’t be getting it for that price around here. I know you will enjoy it
Marty

Thanks for the advice, and good luck with your new property? Why did you sell your "rock farm?" It sounded wonderful!

Colin

Lots of good advice for sure, if your gut says it's right and you feel good about it, go for it!

My wife suggested (dragged me) to move to Vermont, I said "I want land and outbuildings!" When we found our place we knew it was right, I offered full price and no inspection on the spot, and have not regretted it one second.

Taxes $580 a year?! I own 61 acres assessed at $140,000 and our taxes are closer to $5800.00 a year.

Could you really pass on that barn?

Good Luck!
Scott

Wow, almost $6,000 in taxes. Minnesotan's complain about property taxes, but I don't think we have much of a gripe!

Colin

The house looked fairly modest to me from the pictures. The barn and outbuildings look great. Is the house enough house for your current and future needs or do you see a need for an addition coming soon? A lot depends on your lifestyle too. Some people live very modestly and like an old house for its charm. Other people need to have the newest and latest and most up to date house & furnishings. So look at the house in that perspective and decide if it will fit you.

I live in a very rural section of a small town, yet a 2 acre building lot just up the street from me was listed at over $100,000 this summer!!! Land & house values are really crazy here. So the asking price there sounds really cheap to me .....LOL
It looks like a great place to do some serous tractoring! And you can fit lots of tractors into those outbuildings.....LOL

Good luck!
Carl

There's 60 acres of hardwood and fields next to this farm that is going for $1,800/acre. You should move out! :-)

Colin

Sheesh... you are as bad as I am...the first picture you put up is of the barn! ;)

What are your plans for this property?

The houses you are fixing up (wow, when you are not flying or tractoring...you are a busy man!), are they older or historic houses? I've long been interested in preservation, and am somewhat involved with local organizations here in Minneapolis that deal with those issues.

We have not quite figured out what we'll do with the property yet. Since the acreage is low, we'll probably have to stick with smaller livestock such as goats, and do some more intensive vegetable/truck farming until more property can be added. Ultimately, I'm interested in a small cow-calf operation.

Colin

You have some good advice down below but in the end my only real question is how far outstate is the place located? Heres how I see value:

That swamp land has value to hunters, it sounds like deer heaven. I see hunter groups buying up land all the time for $1000 an acre. So that 25 acres has gotta be worth at least $10,000 or $15,000, maybe more.

The fifteen acres of tillable land should be worth at least $1000 an acre, figure another $15,000 for that.

Now for the buildings- yeah they may need some work etc but what would you have to pay for a house in town? Can't get anything for less than $50,000, can you? And here you're getting a barn, machine shed, etc. too.

If you are within driving distance to Minneapolis, Fargo, Duluth, or other 'metro' areas, I think you could only conclude the values would be even higher.

If you are planning to stay there for a long time consider it an investment in lifestyle. Individual farms don't come up for sale very often, many times not for generations. This one is close to your parents.

That place is worth $100,000 easy and I personally would be comfortable with $135,000. As long as you can work out the legal issues. Need a good reliable survey. DO get buyers title insurance. Do require the sellers to pay for the issues with the septic system and any that become apparent re the well.

Are you 'handy' so you can tackle many of the repairs that will be made yourself without having to hire everything out to contractors?

Colin

Then, I'd ask them to supply a land survey no more than 5 years old. Walk out the property lines to make sure there are no encrochments.

And, I'd get an independent appraisal with at least 3 comps. I'd also ask them to provide a recent engineering inspection of the house and out buildings.

Then make an offer based on knowlege of how much cash outlay it would take to bring it up to snuff. Remember, that cash outlay won't be on your mortgage. An appraisal will be necessary if you seek a mortgage.

Then, I'd ask them to supply a land survey no more than 5 years old. Walk out the property lines to make sure there are no encrochments.

And, I'd get an independent appraisal with at least 3 comps. I'd also ask them to provide a recent engineering inspection of the house and out buildings.

Then make an offer based on knowlege of how much cash outlay it would take to bring it up to snuff. Remember, that cash outlay won't be on your mortgage. An appraisal will be necessary if you seek a mortgage.

When you say "3 comps..." do you mean 3 comparisons? If so, to what? Sorry for my ignorance on that one.

Colin

I did something similar to what you are considing about 17 years ago.. Interest rates were DD, so it was really a buyer's market at the time and I was able to purchase 52 acres with old farmhouse and detached garage (no barn or outbuildings) for 60K. Bank wouldn't lend without the septic system replaced - which I negotiated as a condition of sale with the seller, who agreed to have it done.

Colin

So I will go the other way.

No place is perfect. But there are places where you find you can live with the imperfections and spend money to repair or restore and feel like you are doing something wonderful, beautiful, and positive. There are other places where you find that most everything is up to code and should be fine, but every little problem (and of course they come up) is like a pebble in your shoe. The difference is about what's in your heart.

My advice to everyone in your situation has two parts:

First, sit on the steps of the house. And on the floor in a corner inside the house. And somewhere around the barn, inside or out as you think makes most sense. And imagine. Can you feel yourself there? Can you see yourself, feel your own self, coming in from the fields in the spring? Or sitting on the steps in the cool of a summer evening? Can you imagine the way it will be with people in the house, and furniture, and a Christmas tree or a birthday party? Or is picturing or imagining those things hard to do?

Second, if you decide to buy the place, know this: even the perfectly right place feels like a mistake the first night you move in. Some people call it "buyer's remorse," but I don't know if that's really what it is. That first night you move in, you will be sure you made a mistake. And it won't mean ANYTHING. So just know it's there and let it go by, and then get up the next morning and see what's what.

I hope this helps a little,
Dawn

All of the balancing and the nervousness of making a huge mistake hang in the air over our inexperienced heads. We're trying to keep a good focus on the problem while not letting the intellect overwhelm what our sense is of the place, and as you say, determine if it's a sense of place that makes us feel if we belong. And trying to determine what issues and complexities will inevitably rear their heads up. Hopefully some of the bigger one's we'll know in advance.

Colin

Check the site link below.

They are not affiliated with any realestate organizations to avoid any conflict of interest. They work for you.

The real estate agent may give you a list of inspectors to choose from, but these are usually inspectors who won't hold up a sale and may leave things undiscovered.

• ASHI

Lots of excellent advice below, so I won't repeat any of it. You know that my expertise is in the house and buildings. Just a few comments at this moment.

The electrical system is probably a 60 amp system with the early romex fabric and tar coated wiring. At this age, the fabric and tar have turned quite brittle and thus are a safety hazzard....meaning it is time to replace it all and come up to current codes on electrical. Of course time and $$.

Your statement about the wood heating system. I suspect that the chimney is original and probably not lined with a clay flue liner, but just brick and mortar. Usually the mortar has degraded so that the chimney needs to be rebuilt to be safe.

The wood heat is supplemented by propane wall mounted heaters. WHOA!!! I see no vents to the outside, so those heaters are probably not vented and will be spewing CO and CO2 and H20 into your living space. This system was once legal, but is not legal anymore. I once lived in a house with those unvented heaters in the 60's, but we were smart enough even then to never turn them on. Now we know more about long term CO exposure, and its negative health effects.

My advice about price is to consider the 15 acres tillable, and the 1 or 2 acres of homestead area at market value for your local area (maybe $2,000/acre) as your top dollar offer. Of course the heirs in the Twin City market area will cr-p their shorts at such a lowball offer, but that is all it is really worth. The swamp acres are a liability with taxes and regulations, so from a strictly financial perspective, you'd be better off not owning those acres. Yes the wildlife and birds and the beauty of swamp land is nice, but it would be even nicer if the county owned those acres.

I'll be glad to talk with you further if you want.

Paul in MN

I'll give you a call this evening.

Colin

Colin

Colin---try to find out as much as you can about the previous owner/family. Part of what I do for a living has allowed me to see results of poor estate planning/transference plans. There may be liquidity problems with this particular estate, beneficiaries wanting to get "there share" of the $$ in a hurry, or if the Estate is large enough, they may be looking for quick cash to meet Estate Tax deadlines. That could mean a low ball offer just may be taken----good luck---Tim

Another thing I've been wondering about is that the 2 children who are managing the estate are from the Twin Cities. In talking to a Realtor here in Minneapolis, the Twin Cities market is such that if a house is listed for more than 120 days, that's slow. If the sellers also have that perspective, maybe there's some additional negotiating room.

Colin

1. What kind of boundary survey and markings are there. Meets and bounds descriptions on 200 year old deeds can be tough to enforce in the absence of a modern professional boundary survey.

2. Around here "assessed market value" is a tax evaluation used to figure your property tax. Appraised market value is what it's "really" worth and around here is usually a good bit more than the assessed value. Get an independent appraisal - usually the bank will require one as part of settlement and may require you use their appraiser. The cost will show up on your settlement sheet.

3. Make them either fix the septic or escrow funds from the selling price to pay for them.
   If the latter make them escrow another 50% of the estimate to cover any costs over the estimate. In my jurisdiction the property would not be saleable as a residence with a substandard/defective septic system.

4. Check all land use restrictions and covenants(e.g, protected wet lands/easements/subdivision rights/no swine/no stills/etc.) Do mineral rights convey?

5. What kind of well/flow rate/age/history/water quality test?

6. House electricals: age/condition/capacity.
   

HTH,

TOH

A survey was done this summer. Is there anything that I should know about surveys ... are there surveys that are non-binding or only provide limited information?

Are there some red flag issues I should be looking for with regards to the wiring. It's a 1940s house.

Colin

TOH

TOH

Colin

TOH

And if you think that's scary just ask me about my well....

TOH

Colin

TOH

Colin

I failed to mention that it is offered "as is."

I should be able to get an idea of land use and set-back requirements for the existing structures from the County.

The building site itself is up on a hill above the low land. County requirements are that a bid for a septic system has to be in hand at time of closing. The buyer has to put 150% of septic system bid in escrow at that time, and has 12 months to complete the work.

Thanks again for the advice!

Colin

Thanks!

Thanks!
Colin