City wants to buy my land

Rental Property Investor · Indianapolis, IN · Member since 2018 · 67 posts · 48 votes

Hey BP,

I purchased two vacant lots in NW Indiana 4 years ago and recently got a letter from the city stating they want to buy due to downtown renovation. As a buy and hold investor, I've never actually sold any of my properties but am considering selling since I don't have an immediate plan to build on them.

My question is does anyone have negotiating tips or personal stories they can share about selling to municipalities.

Thanks! :)

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Theresa HarrisPro Member

Member since 2019 · 15k+ posts · 11k+ votes

Quote from @Ben Baker:

Why don't they pay the county assessed value? I mean that's the "real value" as determined by the government, right?! I guess the argument only works if your assessed values are astronomically high as compared to what you could actually sell something for (like ours are in our county).

The assessed value is for tax purposes and is often lower than the market value.

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Karl B.
Rental Property Investor · Erie, PA · Member since 2015 · 1k+ posts · 2k+ votes
3y
First I would look into what they've purchased in the past and for how much. You may be able to ask the local property tax/appraiser's office for this information.
If they throw you a number you like and you're willing to sell, I would then say something like, "I'll tell you what, I'll sell the two lots to you at that price if you let me into some blighted properties you plan on knocking down because I want to take the doors, cabinets, crown molding, etc. so I can use them in my current rentals."
Old homes have some nice hardware!
3 Reply
Ben BakerPro Member
Member since 2020 · 5 posts · 5 votes
3y
Why don't they pay the county assessed value? I mean that's the "real value" as determined by the government, right?! I guess the argument only works if your assessed values are astronomically high as compared to what you could actually sell something for (like ours are in our county).
1 Reply
Theresa HarrisPro Member
Member since 2019 · 15k+ posts · 11k+ votes
3y
Quote from @Ben Baker:

Why don't they pay the county assessed value? I mean that's the "real value" as determined by the government, right?! I guess the argument only works if your assessed values are astronomically high as compared to what you could actually sell something for (like ours are in our county).

The assessed value is for tax purposes and is often lower than the market value.
8 Reply
Eliott Elias
Investor · Austin, TX · Member since 2021 · 9k+ posts · 5k+ votes
3y
Treat it the same way you would treat any other negotiation. Do not take a price cut and make them pay retail.
4 Reply
Jonn Vidal
Bel Air, CA · Member since 2017 · 165 posts · 47 votes
3y
List for sale without further ado; best & highest!
5 Reply
Sam YinPro Member
Los Angeles, CA · Member since 2021 · 584 posts · 738 votes
3y
This happened to me once. The state forced me out of my home to build the 210 Freeway. I was young and scared and took a reduced deal in fear of the eminent domain laws. Basically, I had a house that wa purchased for @92K. I was paid out #110K. After some weak/naive negotiations, they have me an extra $20K for my pain.
My neighbor, same type of property two doors down, got an attorney to help negotiate and got an extra $144K.
If I were you, negotiate it up as much as you can, hopefully a little over market value.
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Dan H.Pro Member
Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
3y
To take an offer without going to open market is basically an off market sale. Off market sales are often below market rate.
If you are interested in selling, why would you choose to not simply place it on the market and accept your best offer?
good luck
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Marcus Holloway
OP
Rental Property Investor · Indianapolis, IN · Member since 2018 · 67 posts · 48 votes
3y
Quote from @Dan H.:

To take an offer without going to open market is basically an off market sale. Off market sales are often below market rate.
If you are interested in selling, why would you choose to not simply place it on the market and accept your best offer?
good luck

I wasn't planning to sale. I should have mentioned there's a huge revitalization project going on in the area. If they're willing to pay above market because of this, I'm obviously open to it.
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Marcus Holloway
OP
Rental Property Investor · Indianapolis, IN · Member since 2018 · 67 posts · 48 votes
3y
Quote from @Karl B.:

First I would look into what they've purchased in the past and for how much. You may be able to ask the local property tax/appraiser's office for this information.
If they throw you a number you like and you're willing to sell, I would then say something like, "I'll tell you what, I'll sell the two lots to you at that price if you let me into some blighted properties you plan on knocking down because I want to take the doors, cabinets, crown molding, etc. so I can use them in my current rentals."
Old homes have some nice hardware!

Great advice! Thanks!
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Jaron WallingPro Member
Rental Property Investor · Indianapolis, IN · Member since 2018 · 4k+ posts · 4k+ votes
3y
@Sam Yin Your fears about eminent domain laws are real but hopefully you didn't beat yourself up too much. I have a friend who's house was bought out by the county for a highway construction. Her property along with a dozen others were demolished. Every property owner was paid at least market value, but in total she was paid well above market value. They even paid for moving costs. She didn't have much stuff, had friends help, and pocketed the rest (tax free). She hit the lottery given the location and poor condition of the house.

It's a rare situation based on what I've learned from her experience.
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Jay ThomasPro Member
Real Estate Agent · Houston, TX · Member since 2021 · 1k+ posts · 715 votes
3y
That's a great idea! Real estate is all about making deals that work for both sides. By getting access to the fixtures from the blighted properties, you're able to add value to your current rentals without incurring additional costs. It's a win-win for everyone involved! Plus, you can score some really nice hardware and give your rentals an extra touch of character. Good luck with your negotiations!
[email protected]832-889-5607
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Chris Davidson
Real Estate Agent · Boise, ID · Member since 2016 · 1k+ posts · 888 votes
3y
@Marcus Holloway Never tried it but since you are a buy and hold, why not ask them if they have some land they are willing to swap in a area you want. Could be from a pending tax sale or just land next to a current city property they aren't using. Or just get the funds you are happy with and move on to the next thing.
Best of luck!
4 Reply
Brad L.
Rental Property Investor · Manitowoc, WI · Member since 2016 · 178 posts · 186 votes
3y
I'd argue that maybe this is a sign you should not sell, at least not until other properties start being developed.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
3y
Quote from @Chris Davidson:

@Marcus Holloway Never tried it but since you are a buy and hold, why not ask them if they have some land they are willing to swap in a area you want. Could be from a pending tax sale or just land next to a current city property they aren't using. Or just get the funds you are happy with and move on to the next thing.
Best of luck!

I like that idea we have done that with Timber land at least with Stimson lumber but the feds will do it so will the state.. you being in Boise have probably seen the maps were federal and BLM and state lands are in sections ( 640) acres and ownerships are checkerboarded with private lands.. Not sure why they did that way back in the day.. but there is a lot of that kind of swapping that goes on to fill in your checkerboard squares. Indy for SURE has a ton of property that is excess might even get a beater house.
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Chris Davidson
Real Estate Agent · Boise, ID · Member since 2016 · 1k+ posts · 888 votes
3y
Quote from @Jay Hinrichs:

Quote from @Chris Davidson:

@Marcus Holloway Never tried it but since you are a buy and hold, why not ask them if they have some land they are willing to swap in a area you want. Could be from a pending tax sale or just land next to a current city property they aren't using. Or just get the funds you are happy with and move on to the next thing.
Best of luck!

I like that idea we have done that with Timber land at least with Stimson lumber but the feds will do it so will the state.. you being in Boise have probably seen the maps were federal and BLM and state lands are in sections ( 640) acres and ownerships are checkerboarded with private lands.. Not sure why they did that way back in the day.. but there is a lot of that kind of swapping that goes on to fill in your checkerboard squares. Indy for SURE has a ton of property that is excess might even get a beater house.

Not really sure why they did it either always assumed it was an old homestead or something and thus just left as it was. But now got my wheels turning and may have to dig deeper and find what was the reason.
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Joshua Matthews
Real Estate Agent · Indianapolis, IN · Member since 2022 · 45 posts · 52 votes
3y
Let the open market decide for you...don't pigeon hole yourself to one single buyer, let alone the government. Unless you wanna continue working what's worked for you thus far, then continue to Buy and Hold. It's a good sign when the city wants to buy though ;) good work
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Patricia Drew
Member since 2020 · 25 posts · 20 votes
3y

Usually when a city buys a property it must first get an appraisal and the city commission must approve the purchase. This is to avoid any shenanigans, like paying cousin Bubba twice what it's worth. Their hands are somewhat tied; they have a responsibility to not overpay. If you're happy with the appraisal, sell. If you disagree with their appraisal, pay for your own. You'll probably have to meet somewhere in the middle if your appraisal is higher.

I occasionally buy foreclosures. I noticed a foreclosure that was surrounded by properties the city had bought for parking/expansion of City Hall, so I bid a few thousand more than I normally would have.

The house had been deemed uninhabitable by the city and needed a gut renovation. The lot was large enough to subdivide.

When I emailed the city manager to see if they were interested, I got a response in three minutes. Who says government is inefficient?

I told them I was planning to fix the house and subdivide the lot but was willing to give them first dibs.

I had to have a contractor submit a line item estimate of what repairs would cost.

The city hired an appraiser to determine the fair market value if the house were fully renovated and the value of the extra lot after the lot split. They subtracted the estimated cost of renovations to come to the purchase price. I had researched comps and thought the appraisal was fair.

The city manager presented the purchase at the weekly commission meeting so the public could weigh in. At the end of the presentation, the commission voted to approve the purchase. We closed two weeks later.

I didn't have to pay any realtor commissions or incur the $10,000+ cost of doing a lot split. I negotiated with them to pay every penny of the closing costs since it would not affect the official purchase price. Property taxes were up to date, having been paid by the lender. I did have to pay the pro-rated property taxes for the current year.

Before agreeing to sell, I also got the city manager to cancel the $8,000 in code violations racked up by the previous owner. Code violations are not extinguished by foreclosure.

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