Buying A Lot In This Market (Successfully)

We work with many clients who are actively looking for property to develop. Whether you are looking for a teardown or an empty lot, it is important to understand the current market because it is pretty darn interesting. From the outside looking in, it may seem that because local home sales are down considerably compared to the last several years, that we’re in a buyer’s market. Makes sense right?

Not so fast. In order to interpret the current market, you need to understand what is driving the decline in home sales. The biggest reason for the decline is low inventory, which is being driven by higher interest rates. Owners who are sitting on a low interest rate are reluctant to trade that in for a higher rate. While I believe many owners will be forced into selling eventually, given the transient nature of Northern Virginia, right now, sellers are sitting back.

So how does this help you to buy property to redevelop? Because knowing the market will help position yourself for success. Here are some tips!

Tip #1: Acceptance Of The Current Market

We’ve already covered why we’re still in a seller’s market, and knowing this means acting like it. Properties that are prime candidates for redevelopment are highly sought after. Because of this, you are likely to be competing with other buyers.

Make a fair offer. In this market, you aren’t always going to be able to get a “deal.” If the lot is in a prime area (Northern Virginia) you need to be fair in what you’re offering, or you will lose out to better offers. If you like the lot and you can see your family living there, offer what you’re willing to pay for it. You may have only one chance to bid if there are multiple offers.

Consider offering the seller an incentive. Unless you are planning to move into the property before you tear it down, you won’t have any use for the lot for at lease a couple of months (until you are close to pulling building permits). Would the seller benefit from a free rent back? Be creative in offering something the seller may see as an advantage over other offers (quick settlement, cash, etc…).

Tip #2 – Be Prepared So You Can Act Fast

When a listing comes on the market in your target location, you must act fast. If you like the lot, location, price, etc., make an offer.

Have your bank letter (verification to the seller you can afford it) and earnest money ready! I know it’s scary and A LOT OF MONEY but you’ve prepared for this, and you are ready. Don’t hesitate, make the offer.

Worried about the feasibility of the lot? No problem. I ALWAYS, ALWAYS incorporate a 5-10 day study period, so we can conduct a feasibility study after the contract is ratified. It covers you if anything is discovered during the study period that would prevent you from building what you want to build. Putting the study period in the contract also allows you to secure the contract. You wouldn’t want to waste valuable time researching the lot while others are making offers. Make your offer, get a ratified contract, then do your research during the study period.

I know it can be exhausting looking for a lot, especially when inventory is so tight. But stick with it. Once your new home is built, the effort and investment will be worth it. Especially if you choose to build with us. Our clients enjoy instant equity building the NDI way.

Want to hear more? Contact us for a free consultation at 800-406-8555 or hello@newdimensionsinc.com.

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