Quick question to you Real Estate Developers

13 Replies

Hello Developers. 

When you're seeking to purchase for land to develop, and the seller is not interested in selling, what do you do?  In the mind of the seller, why don't they sell?  How do you over come objection?  How long does it take?

What solutions do you bring to the table and how to you overcome their hesitations?

If the owner does not want to sell I go find another piece of land and wait. 

Ask them if they know of someone in their area that might want to sell. The solutions would be in the form of building out the passive or residual income presentation and also giving them a portion of the profits when the development is done. 

If you have done your research of what the zoning is what the city is allowing for development in that area,  then you will have a way to come prepared to a sit down with potential sellers.  Objections are really every investors nightmare because you want the yes and they say no. Every situation and person is going to be different. 

And in this market sellers are trending to be a bit stubborn and sometimes unrealistic with price points as you know.  I was looking at a piece of land in taylorsville that the sellers were being stubborn about coming down in price on and it made the numbers not work out. So sometimes it is just best to move on. 

just drip on them..  when I was in the logging business my partner would say all leads are still leads until the timber is on the ground then it won't become a lead again for 50 t0 70 years..

many times we did not get the deal for 3 to 5 years after initial contact.

land owners for development same way.

just keep after them in a very nice professional way.. and hopefully when the time is right they will think of you or when your checking in with them every 6 months or so its that call that sparks an interest.

PS I am in Contract right now on a parcel in Portland area that I first looked at an offered on in 06... seller wanted to much we could not come to terms.. then the recession hit.. he still wanted to much but now the market has finally move to his comfort to sell number.

@Spencer Taylor besides my flip answer...the drip works well. I mostly (only) work in downtown Charleston. And there is so much work that needs doing that I don't have too much of a need to be super pushy about trying to find the right thing. That can sometimes change if I'm trying to link a bunch of lots together and then it comes down to money or giving someone an opportunity to get into the deal. 

Besides money, being a known quantity helps a lot.  I am also a GC I'm purposely generous with my time. If the eldery gentleman up the block needs his sink to stop leaking I just pop in and do it. If his daughter has a work emergency and needs me to check in on something or someone I do that too. When the teenager's car is broken (again) and he and his buddies are fixing it on the street I come out with my big jack stands, the crawler and some waters. 

Not only is it the right thing to do but it puts me in a position to hear about opportunities long before they ever hit the market. Houses and land are unlike other assets because they so often have a huge emotional component attached to them. 

People need to feel good about what is often a tough decision to sell. Think about it, it's usually triggered by a death, or financial hardship and so under those conditions the decision about who to sell to is often about more then who has the most money. 

If you can help folks feel better about the sale that really helps. If they you're going to do right by their childhood home or empty lot where they used to drink beer and throw horse shoes you're a lot more likely to get the deal then someone who just came off the street with a checkbook. 

I have a friend that does this in Cambridge MA. It's one of hardest and hottest markets in the country. And he recently got one of the last ramshackle places left on one of the nicest blocks in the city. How? He sent the family a Christmas Card every year...for FOUR YEARS. 

The short takeaway is you need to build relationships in and with your community before you can start to meaningfully add or transform your community. And at the end of the day, developers are in the business of building community. 

@Jeffrey Stasz

your on it dude.... not sure if you saw this video

but look at the driveway to the right of our drive way .. you see that new concrete driveway we did that for the neighbor all for free.... talk about good will and someone might refer something and or at least they keep an eye on our house during construction they kind of take ownership right ??

http://vimeo.com/263639790

 

Also in our logging days and this goes for the development ground as well.

My partner Steve would ALWAYS have his cooler with Fresh Salmon some Elk jerky and sometimes steaks  SMoked salmon  all stuff he got on his coastal Oregon property.

you walk up to a land owner and hand them half of a side of Fresh salmon caught from the ocean not that junk you buy in the store that is farm raised.. and who you think they are going to call.

I called him Johnny  salmon seed.. LOL.. he was and is a pro at this..

the gestation in these land deals is a long time. It was hard for me to learn this coming from CA.. were everything was go go go.. in this state is slow slow slow and these folks simply want to do business with people they like.. as korny as it sounds.. its a huge deal to them.  ITs how I beat Lennar and DR Horton to the deals.  they show up with 100 page contracts and I show up with my little two pager that anyone can understand.. the 100 pager they just gloss over.. Even I have to send those to my lawyer to review before I will sign them..

@Jay Hinrichs I did see that. I bet that is the cheapest driveway you've ever built. That must of been a tricky lot to coordinate deliveries too. 

I'm building new fences for everyone at my Dingle St. project. It makes site work so much easier and helps everyone feel comfortable which makes the job run much smoother. 

Originally posted by @Jeffrey Stasz :

@Jay Hinrichs I did see that. I bet that is the cheapest driveway you've ever built. That must of been a tricky lot to coordinate deliveries too. 

I'm building new fences for everyone at my Dingle St. project. It makes site work so much easier and helps everyone feel comfortable which makes the job run much smoother. 

we got lucky on Woodal  the neighbor behind let us come in from the back.. Now you keep your sights off of that one I want it LOL 

I think you hit the nail on the head with both your answers @Jeffrey Stasz . If they don't want to sell right now they don't want to sell. move on and keep your business moving. Having said that, if the property really has potential, keep the connection alive and work at it. I hope your having success with that one we talked about a while back.

Funny story from the other side shows it is possible to go to far. My wife gets a birthday card every year from a guy we bought a car from 20 years ago. He was the "we have to check with my manager" guy so we actually only dealt with him for about ten minutes. The first couple years we thought, hey, he's good and professional, we could go back there, but after moving to different cities and even states, it just becomes obvious its an automated tickle file and there is no real thought behind it.

Originally posted by @Tony Kohnle :

I think you hit the nail on the head with both your answers @Jeffrey Stasz . If they don't want to sell right now they don't want to sell. move on and keep your business moving. Having said that, if the property really has potential, keep the connection alive and work at it. I hope your having success with that one we talked about a while back.

Funny story from the other side shows it is possible to go to far. My wife gets a birthday card every year from a guy we bought a car from 20 years ago. He was the "we have to check with my manager" guy so we actually only dealt with him for about ten minutes. The first couple years we thought, hey, he's good and professional, we could go back there, but after moving to different cities and even states, it just becomes obvious its an automated tickle file and there is no real thought behind it.

we only used the phone.. we only used mail if it was last resort.. belly to belly..  

Very Smart, be someone knowledgeable about the property and the first they want to call when they are ready to sell because there is at least a little connection,not the regular junk mail.

So this is an interesting question, and there have been some great answers here. 

From my standpoint, coming from the pure development world, I have gone through an evolution of finding and managing land deals:

Phase 1 - early years, every site that was available, was a deal that could "work" if we tried hard enough to work the deal, this includes sellers who were a "no", and it included sites that were vacant in the middle of a built out neighborhood. Side note: My saying about these types of sites: "There's always some story about a vacant site in a built out neighborhood, difficult seller, family group of (not) sellers/owners, environmental issues (toxics, tanks), etc." Always turns out that there is a story, otherwise if the site was easy, it would be built on already.

Phase 2 - a little tighter on time spent per deal, still very much in the "I can make it work" mode, but a little quicker to jettison a deal if it didn't work.

Phase 3 - present day, generally, I am merciless in declining deals that have the wrong kind of hair on them, have difficult sellers, terrible site issues, impossible zoning, etc. 

I always tell sellers that I speak with this:

"I have sold numerous land deals that we have acquired and entitled, and it's super hard to be a seller, you are in essence "stuck" with the land, but you do have to compromise at some level, or you'll never sell it" 

Maybe they want to be "stuck", like they love that land, etc. But to transact, everyone has to compromise at some level. Sometimes folks will decide to sell, maybe they decide, maybe their kids decide once they pass on. As a buyer I have an easier (!!) time, I can walk from any deal anytime and not bear any further costs, I can just move on quick.

This is why sellers are always behind the curve in a down market, i.e. prices are dropping, sellers slow to notice and drop prices, they always hold out overpriced. When it's an up market, sellers are always quick to raise prices ahead of the market. It's the damnedest thing, maybe sellers are always just "keep my price high, I don't care" Usually, other real estate people are the best sellers, they aren't in love with their land, they are merchants, who need to trade land to make money or produce a deal. 

I don't spend anytime tracking sites with difficult sellers, but do a have a small list of sites that we track for various reasons, but it's more like the yearly call or email to check in. Do the same with the brokers if they are managing the site sale and not the owners directly. Sure, do we miss the occasional killer off market deal, answer is "yes" We see it as a game of averages, and we'll focus more on what we can acquire now and build reasonably soon. 

So then the question becomes, what do you want to do, build deals, or track lots of sites for a long time. 

Our answer is this: we have identified over 500 land parcels that fit our UTH product type in the LA Basin, with a tight focus on the Long Beach, south LA county, and northern Orange County markets. We look for deals that are in middle and lower middle income neighborhoods (fits our UTH product criteria, less competition from market rate developers), and are on the market now. With the volume of projects we produce, we aren't in the business of massaging sites over the long term.

We need to build within the next 12-24 months, or sooner, merchant build style apartments deals. 

So we do all the normal stuff, LoopNet, Zillow (weirdly productive in this space), brokers in our network, sites that we drive by (building one now, drove by it a hundred times, till was right time to make the call), etc. I do have folks on my staff that will search title to track down an owner, but our hit ratios on actual sales is pretty low in that scenario. We have much better luck tracking non-mainstream sites that are on the market, but ignored by the larger or mainstream developers. Maybe it's the neighborhood or city it's in, maybe the site is configured a little weird, odd shape etc, or maybe it's next to industrial. We like those kinds of stories, where other developers don't have the vision and pass. We just closed last Friday on a site in Fullerton that fit this exact situation, older neighborhood, blue collar/working class, west Fullerton (older, not so nice) and we got a great price on it given our underwriting. Listed by Marcus and Millichap, etc, yet still bought at a good price because not your mainstream site.

Lot to digest, hope that helps.

~ Scott

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