I am not sure which guru would be best suited to answer this so it is open to all.
I'm pretty sure it's not me.
I posted several times (to Jeff's delight I am sure, LOL) about buying a neighboring piece of property in mid-Missouri. We live just outside city limits and we have a bit over five acres, with a creek along the Southern border of our land. The land on the other side of the creek (3 acres) has a small one or two room octagonal house (about 500 square feet) that was built as an artist's retreat and a small screened in, well if kids played in it I would call it a clubhouse. It is appraised at $42,500 on the county assessor's website.
It has been in the same family for three generations and the most recent occupant was the grandson of the owner who married a woman with two school age children, so it obviously is not suited for them. It has been unoccupied for some months now.
I would like to buy it now or have the right to buy if they ever sell.
I have been reading about options and first right of refusal.
Questions
a) should I contact the mother of the most recent occupant, who controls the property and is a domineering woman
I know that I wouldn't want to, but if she runs the show, not contacting her to negotiate might kill the deal. If you have an "in with anyone in the family, approach them first to test the waters and ask basic questions. DO NOT give any monetary figures, just mention that it's empty, and you are interested. The VERY best thing that can come out of this is Mom comes to you. That's what you want. If you don't have a good "in" with any family members, then you must go to Mom. Or send a letter, but that would be tacky when you are talking about a Neighbor.
b) should a retain a realtor or attorney and have them contact the mother
Normally I might have said yes, use a Realtor if you are new. They SHOULD know how to avoid some basic pitfalls. You would have to pay the Realtor, and you ALWAYS have to pay a Realtor way more that the worth of their services (And remember My wife and I are Realtors, just being honest here) Let me qualify that: This is your Neighbor, you would surely pay a Realtor more than they are worth. You want to buy a Rental in another state, dear God find a Realtor that knows the market, they are worth their weight in gold. But this is your Backyard. I wouldn't put other people in the mix. Worst part about using someone else, is that you could end up in a Law suit for talking to Mom after you hire the Realtor, as the Realtor won't want you working the deal. Honestly, I doubt that would ever happen, but the Realtor isn't going to want you "messing" up the deal/ Costing her money. At least a Realtor will work at the sale, a Lawyer will send over some papers, and has no real vested interest in you getting the property.
All in all, Do it yourself. Keep us updated, we can help.
c) which do I want, an option or first right of refusal in this case (I am suspecting that the mother will not sell and once she dies, the kid will grab a cash offer)
Unless you get a right of Refusal in writing, it will be worthless. You don't often get one of those in writing. Seems simple to get, but it isn't. If the seller was smart, they would give them out like candy, they can't lose, but they don't. If you can't get it in writing, they aren't serious about the opportunity. A right of refusal is easy, and doesn't cost you a dime.
An Option is going to cost you out of pocket now. Say a Grand and the terms are all spelled out in every way. Generally when these happen, the seller absolutely wants to sell, and the buyer is dragging his feet. The seller takes as much money as needed to make them happy at leaving it off the market, and the seller has time to figure it out, be it reluctance or funding issues. It's also a move for the buyer to Sell the "paper", or sell his option for more than he paid to get it, never having to close, never taking the property into his name.
The advantage of an Option is that it is standard that all the details are worked out. Standardly in a Right of Refusal, nothing is worked out. So the Mom calls you up and says "Quarter of a Mill, take it or leave it" and your Right has just vanished. (Which is why Sellers should hand them out like candy) You aren't paying that, and Mom lists it in the MLS for a week at $250K, and then drops it to whatever is reasonable.
IF THEY WON'T SELL NOW, who knows, maybe it's Jr's place after he gets out of College this spring, or it's the Family vacation spot, or who knows? Ideally, you want something that says you give up a SMALL amount of money, and get a fixed price that you can enact within the next few years.
d) how do I know what to offer in either case for the buying price and the contract price (meaning to enter into option or first right of refusal)
In Indiana, the Tax value is a complete Joke. I have many Properties Valued way too low for taxes, and about as many valued way too high. I go down and appeal all the time, the whole process of the Assessor actually knowing the value is a Joke. I can't tell you how many houses are valued at $100K that no one would give $40K for. I have a Property that Grosses $1,050.00 a month that is Valued by the assessor at $28.6K. The whole process is a Joke.
If I understand correctly, the structure on the property is a tear down? If that is the case, then it comes down to what the going rate for "recreational" land is in your area. In my area, "Recreational" land is climbing, and getting close to the price per acre of Farm land. LOTS of Deer hunters here want their own land to hunt on so the prices have started to climb. Recreational Land used to be dirt cheap, because it wasn't established Farm land.
Call a Local RE Agent/Broker and ask what the going price per Acre on Recreational Land is. Just lie to them and say you are looking to sell non Farm land. You have land of your own, so you can play this up easily. Don't let them waste your time (RE Agents are weasels - Remember, I am one) just get your info, and blow them off.
My Wife has a Client looking for Hunting land. As of a few weeks ago, Recreational land was going for about $3,600 an Acre around here. Now that would go up if you had water access, etc......
I guess that what I am saying is that MY EXPERIENCE says that Tax values are WORTHLESS, do your research.
At the end of the day, the very best thing you could do as I stated above is float your desire to buy to a Family member you know, and let Mom contact you with a price. At least you know what they are thinking then. UNLESS you know that the structure has Sentimental Value or some such thing to them (For all I know that's where The Great Grandparents conceived Grandma??), ALWAYS refer to the structure as a Tear down. You want them to understand that you won't use the structure, you are only buying the land. It's a tear down.
OK, know that I have said all that.
What is the land worth to you as the Neighbor?? What if they put up a Walmart there? SERIOUSLY, if you want it, and you have the means, give them an offer they can't say know to. Just get it.
Here, I'll try one for you: I'll give you Shaun Alexander for Kellen Winslow II. You know you are taking that. Maybe Winslow is just worth it to me. Who cares, but I know I am getting Winslow.
Is that land worth it to you? If the answer is an overwhelming YES, they just get it, whatever it takes (Within reason). You will ALWAYS, ALWAYS regret not buying it. 10 years from now you will seriously look back and wished you had offered twice as much.
Speaking from serious experience here. If you have to have it, and you don't get it, it will HAUNT you forever......
e) any other suggestions on how to persuade a person to sell or handle the situation appreciated.
You you really want it, I am serious here, offer more than it is worth. You can spend the next 30 years pissed off at the new Neighbor who did buy it and now runs a Motor Speedway every Wednesday, Friday, and Saturday night. If only you bought it back when it was only $XXXXXX. It's worth twice that now, you would have made money on it, but no, you had to save a few grand, and now it sucks more than you ever thought it could.
Remember, speaking from experience here......
Don't be an idiot here. However, if you want to play hard ball, then go in with the price of Recreational land, adjust BIG if there is water. The Structure is a Tear Down, don't say it any other way. Play up that you are a Neighbor, committing to keep the land free of development, Just the way Grand dad wanted, whatever. (You can always sell everything to a Super K-Mart down the road, Better yet, use all the property you own when you are in your 60s to build your own Housing Development and then travel the world on the profits from "RedZone Acres - The Swankest place in town to live - Prices starting at a Half Million". Just say the right things now to pull at the heart strings)
Honest Advice? Pay what it takes to get it. You will regret it forever if you don't. Sorry to say it that way, but Man, am I ever preaching the gospel here. If you want to trust some random guy on the Internet who doesn't know you from Adam, and viceaversa, Seriously, just get it, it will haunt you for the rest of your life.......
Thanks,
Dan