Posted by Eric in FL on July 12, 2008 at 10:34:36:
Brad,
When I say the following things please do not take them personally but they are written to prove a point. Why in the heck do you care if you insult Lennar? Do you plan on dating Lennar later in life? Do you want Lennar to come over to your home and feel welcome? You see my point. Go look at public record and see if they purchased the lot individually. If they did offer them below that number and gauge their motivation. I would think they did if they owned a portion of the development. There is no way any of us would know what is fair but please take your emotion out of the equation and make an offer. Good luck.
I’m going to make an offer on a building lot (in a gated community in Florida, on which I’d like to build my primary residence).
The community started out in 2002 and is about 90% built out today, with 3 major builders in the community. The third, Lennar, just pulled out of the community, and is selling off their 6 remaining lots.
They are on the MLS, and are listed at $72k each. The price seems fair, as it is comparable to what the lots were selling for in 2002 in the community (mind you, that is based on mls sales data, in which lots are packaged with new homes to be built on them).
The buyer of the lot can use any builder of their choosing (not just the three active in the community), and there is no time restriction in which to start building.
The lot has been on the market for 7 weeks.
I will be offering cash (no mortgage).
In order to get the best deal in this market, how low should I offer for this lot, without insulting or losing the interest of Lennar?
I have bought and sold a decent amount of lots in Fl in last 4 years. Going rate for land should not be more than 20% of home price. So take that number and deduct whatever you want for a discount.
Good luck. You should be able to get for very, very cheap if you are paying cash.
Based on what has happened in FL in the past 2 to 3 yrs, LAND (raw dirt) is selling for about 20% of what it was brining at the peak of the mkt… So what I would do is to go the transfers that occured back in the 04 - 05 time frame and see what they were selling for then. If you use my number of 20% and their asking price of 74K, that would equate to a peak price of 370K for that same lot.
Now they likely don’t have it priced at 20% of what it would have sold for, but use that number in determining what you think it is VALUED at today… Without seeing it or even knowing the area I would guess unequivocally that their number of 74K is WAY HIGH. It is a dream number… a dream that they will influence what someone is willing to pay for the lot, based on what they are asking.
These numbers are from Lennars 10Q report to the SEC:
Three Months Ended Six Months Ended
May 31, May 31,
(In thousands) 2008 2007 2008 2007
Sales of land 27,690 54,422 68,400 95,101
Cost of land sold 33,093 163,219 100,253 230,364
(You may have a hard time interpolating the numbers based on how they display on the forum here).
The 10Q then goes on to break out the sales of each by region, with FL being in the east region… While it is too detailed to list here in a post accurately, you should read and analyse the 10Q report, which I post the link here:
The important point of the regional numbers is that the sales volume that is generated in the east region from resales of land is substantially lower than any of the other regions… meaning the losses are way larger and dollar volume of total sales is way less.
You might make your offer… something like 25K CASH, and reference Addendum A in the contract. Then print out a copy of their 10Q and at the top of the page write; “ADDENDUM A”. This will surely make that point that you know what they know, which is their stuff is not all that hot right now…
Essentially they are using the land sales to pay down debt, so from an accting measure something from a land sale, then placed against current debt, is greater than the sum of the offer… You might also verbally agree to re-work the offer to show a sale price of 70K, or even the 72K with a 47K credit at closing… Nothing illegal about doing so since you aren’t financing the deal… This will show a transfer of the 72K which will help bolster the mkt value of all the rest of their inventory… Although you might have a difficult time communicating with the actual person that you need to, in order to present these kind of ideas.
Good luck on it… Did I mention that the 50K might be way too strong…?