?Yank the Land! AKA Severed Improvements! Creative Selling!

Yank the Land!  AKA Severed Improvements! Creative Selling!

 

When selling a property with a building/home on it, there is usually a price that is based on selling the land and the improvements.  Sometimes, because of a high sales price or other market factors, like financing options, taxes, income and qualifications of buyers etc., the listing does not move as well as you might like! 

Yes, you can spend more on advertising, though, you just might consider trying a unique approach to expanding the pool of potential buyers – “Yanking the Land” (AKA-Severed Improvements)!  If you know how most commercial properties or homes on Indian lands are sold, you will have the concept of Severed Improvements!  This idea was a favorite of A.D. Kessler, a popular investor & real estate educator.

Consider selling the building separately from the land (yanking the land) and leasing the land to the buyer for say 30 to 100 years or more! There are some lenders that would finance the purchase of the building, knowing that a long lease was in place.  If the land and building/home, together, would sell for say a $1,000,000, what would each portion be worth?  Looking at a property tax bill, might indicate the proportional value, as in most states, land and improvements are listed on the tax bill separately. 

Remember, that the land would normally be the appreciating asset, while the building would be the depreciating one!  Keeping and leasing the land to the buyers, while selling them the improvements, makes the property cheaper for the buyer, while giving you, the seller, a lump sum of money and continued lease payments to you and/or your estate! 

For example, you might sell the building for $400,000 and lease the land to the buyers for 60 years at $25,000 ($1,500,000 over the 60 years).  The income is spread out over time and would likely lead to lowered taxes and you would still own the land at the end of the 60 years. Meanwhile, the buyers can enjoy the full use of the building and land for that time frame.  If, the building is on a raised foundation, they can even move the building easily, to another site at the end of the lease, or your or your estate could re-negotiate the lease for additional years.

This type of sale/lease combination is not for everyone, though, it can make a sale more possible for the right buyer!

Other considerations for this type of transaction are:

Seller to be a named insured on the insurance policy required of the buyer!

Buyer could be responsible for taxes on the property and any increases!

Seller has the right of foreclosure if the buyer has a loan on the building!

Building/Home on a raised foundation, typically lends itself to a more buyer friendly transaction!

My parting comment is---

“Be willing to do today, what others won’t do, so you will have, what others won’t have tomorrow”!

Fred Eckert is an AVP with Chicago Title (22 years) and is a former

Naval Pilot/Officer with a Master’s Degree in Business.  He has been

Affiliate of the Year multiple times for both PSAR and CREA!  He is on the

Board of the San Diego Creative Investors Association and is an honorary

Member of the North San Diego Creative Investors Association.