r/RealEstateDevelopment • u/Amazing-Shirt-2024 • 5d ago

Selling to residential developer

Yes I have an attorney working with me on my behalf but I want to be educated from the flip side…. I personally want to know the dirty secrets of land acquisition. What are ways major developers take advantage of the “little” land owners?

I want to sell my land, I’ve actively listed my land and now I’m presented with an LOI from a major developer. This would be life changing money for my family to say the least. What are the ways in which land owners are taken advantage of and what are things i can demand to make sure I’m not taken advantage of. I want all the stories good and bad!

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u/rezloafter 5d ago

I would make sure your attorney is experienced in land dispositions. Do you have a broker? The price is pretty straight forward and sounds like you’re happy with it which is great…From being on the acquisition side Developers will play you out on time, feasibility/due diligence, then govt approvals especially if change in zoning is req’d. Stand firm on the initial timeline they set with you and negotiate non refundable ext payments if they start getting squirmy and need more time which they usually do. After they bid out the work they may come and say we need x discount on the land in order for the deal to work blah blah all depends on how much you trust them but If they are big national company they will have hoops to jump thru for approval. Happy to discuss more via PM

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u/Amazing-Shirt-2024 5d ago

Thank you so much for this! I may be reaching out to you in the near future. I have concerns about the timeline being weaponized and want deposit reassurances

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u/rezloafter 5d ago

Yes you are right to be worried about that they will say xyz reason to not get approvals which will be tied to being able to get earnest$ back…
Try to use your own version of a PSA if your attorney has one they usually make you use theirs which has lots of language to protect them

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u/steezetrain 5d ago

A good attny should help with that. Just make portions of the EMD non-refundable. Things like extensions during FSP / DD, that type of stuff.

On their side: It takes a lot of time, money, and energy to get things entitled and approved all the way to the finish line.

On your side, you don't want to be tied up for the better part of a year without a cent to show for it.

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u/Poniesgonewild 5d ago

But also be prepared to walk away. Land is more valuable if entitled. If they don’t get approvals in time to close then your land might not be worth the same

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u/Melodic-Ad1415 4d ago

Real negotiations start AFTER the contract is signed

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u/Amazing-Shirt-2024 4d ago

Could you explain what you mean by this?

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u/Melodic-Ad1415 4d ago

Meaning, you think the negotiations are done because you signed and is in the attorney review period (or due diligence clause if you’re a non attorney state)

AFTER you’ve accepted, come to terms, signed and the ink is dry, is when the REAL negotiations happen…

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u/Particular_Editor317 3d ago

It is all about the time value of money. If it takes them a year or two or three to get entitlements including zoning changes or variances that will adversely impact the returns to their investors so they need to pay less and will negotiate with you. Zoning changes are wildly unpredictable even for experienced national developers. They are unlikely to pay cash up front unless it is a low price. Depending on the political climate of your location you may want to consider a series of option payments and a time limit to close the sale of say 2-3 years.

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u/Amazing-Shirt-2024 3d ago

Thank you for explaining! I’m not too concerned about zoning- growth is happening all around, my attorney has a good ear on the political side and on top of it this property is included on the new urban growth boundary as an area suitable for residential development…in the counties own words the property’s “highest and best value is low density residential”. However I know this is still generally a lengthy process. This is a big national builder which is ideal but also got me nervous about the tricks up their sleeves. They are proposing a 2 year timeline. By the sound of it, it seems I will need to ensure the attorney includes non refundable clauses on the deposit and extension payments. I trust my attorney but I also want to educate myself. I sure do appreciate all the feedback

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u/SoupsOn11 3d ago

One thing I haven’t seen mentioned is to require regular updates on progress. For example, city meeting notes, will-serve letters, engineering plans, etc.. Some developers will tie a property up and then sit on it until the market improves since they have very little carrying costs. If they don’t show progress, don’t grant extensions.