Nine bank-owned acres with a collapsed barn, asked 74, closed 58, no other bids

This is a small one and it is the least exciting deal I have ever done, which is why I am posting it. Land, no house, no tenants, no rehab crew.

A regional bank ended up owning about 9 acres on a county road after a foreclosure on the previous owner. Listed with an agent at 74, mostly cleared with a fence line on two sides and one collapsed pole barn sitting in the middle of it. It sat 104 days with one price cut to 69. I watched it the whole time because I have an alert set for anything over 5 acres in three counties, and I noticed the listing had no soil information and one photo taken from the road, which tells you the agent had never walked it.

I walked it twice, once after two days of rain to see where water sat. Offered 58 cash, no financing contingency, 21 day close, with the barn debris being my problem. They countered 63, I held at 58 and gave them a longer close instead, 35 days, which their asset manager apparently cared about more than the last 5k. Closed at 58 with about 1,900 in my closing costs.

Debris removal and hauling the metal came to 4,150, and I got 400 back on the scrap. Perc test 900, survey 1,750 because the fence line on the north side was not where the deed said it was, which is exactly the kind of thing I have learned to spend money on before I own something rather than after.

Where it stands: the whole 9 is leased to a neighbor for hay at 55 an acre on a one year handshake that I put in writing, so 495 a year, which does not cover taxes. That is fine, I did not buy it for income. The county allows a split down to 3 acre lots in that zone and I confirmed that with the planning office in person before I offered. I have not split it. I will probably sit on it for years.

What nearly broke it was the survey. If the fence had been off by a bit more on the north side I would have been buying a boundary dispute with someone who has lived there for thirty years.

What I keep: reading the days on market and the price cut history before I decide what to offer, and walking land after rain. What I still do not understand is why a bank would take 58 on something they listed at 74 when they had already waited 104 days. Somebody explain the asset manager side to me.

Answer

2joe_delgado5AP4CPRO6

The asset manager side is simpler than you think and it is mostly about their reporting, not about your price. A bank holding an REO asset is usually working to internal timelines on how long the thing has been on the books, and the person assigned to it carries a portfolio of files with an aging report attached. Land is the worst kind of file on that report. It has no rental income potential in their system, it is hard to comp so the valuation gets challenged, it does not qualify for the retail buyer with a mortgage, and every quarter it stays on the list it makes the aging column look worse.

So when you offered 58 with no financing contingency and then handed them 35 days instead of 21, you gave them the two things they actually get measured on, certainty of close and a date they can put in the file. The 5k difference between 58 and 63 is not their decision to make in the same way it would be yours. It has already been written down internally, probably more than once.

Which is why the 104 days matters so much as a signal. A file that fresh gets a firm counter because the manager has to show they tried. At 100-plus days with a cut already taken, the same manager is looking for a reason to close it out. I bid differently at day 20 and day 100 on the same listed price, and on land I barely bid at all before day 60.

One thing I would push back on. You said you will probably sit on it for years. Confirm your tax bill does not jump when the ag use classification depends on the lease, because that varies by state and county and a handshake lease turned into writing may or may not satisfy it. Worth a call to the assessor rather than an assumption.

12 replies

1luis_carrera Get yours

The alert on anything over 5 acres in three counties is the part I am writing down. I have been trying to build a search that finds deals and I keep making it too clever. Yours is one filter and a lot of patience.

4tashaford30PB2APRO7

Question from someone who has not bought anything yet. When you say cash, do you mean actual cash in an account, or a hard money lender who funds fast? I ask because the no financing contingency part sounds like the reason your 58 beat their 63, and I would not be able to do that.

1megan_doyle15 Get yours

What is a perc test and why did it cost 900? I looked it up and I still do not know whether that was for the septic or for something about drainage.

1raj_mehta14CapitalPRO6

The bank held an asset that produced nothing for 104 days while paying taxes, insurance and an agent, and the loan behind it was probably already written down on their books before they ever took title. So the 58 may have been above whatever carrying value they had assigned it, in which case selling was a gain on their internal numbers no matter what the list price said. I read a lot of loan documents and almost none of that reasoning is visible from outside. parcel, did the agent ever tell you anything about how the price got set?

1aaron_fitz10 Get yoursPRO6

This is the first deal in this room that I have read and thought I could actually do a version of. No occupant, no contractor, no draw schedule. Though 495 a year against taxes means the money is entirely in the eventual sale or split, which is a bet on that county being worth more later, and I am not sure I know how to have an opinion about that.

1jordan_ellis2ActivePRO6

flint, the day 20 versus day 100 thing is the most useful sentence I have read this month. Six months of research and I have been treating list price as the thing to negotiate against instead of the calendar.

1aliyah_bAU2APRO6

Adding up parcel's real number since I am trying to learn what first deals actually cost: 58,000 plus 1,900 closing plus 4,150 debris minus 400 scrap plus 900 perc plus 1,750 survey equals 66,300 in. Against 495 a year gross. So this only works if the land is worth meaningfully more than 66,300 to someone, eventually, and parcel is comfortable waiting. That is a very different deal from the flips in this room and I appreciate seeing both in the same place.

3stephen_ok9CO2CPRO6

tally has it, and the 495 lease is really just a way of not paying a mowing bill. I would want to know the tax figure before deciding whether this is patient or expensive. parcel, what is the annual tax on the 9 acres?

1diane_kowalskiPassivePRO9

Walking it after two days of rain is the detail I am going to steal. I have looked at four rural parcels this year and every single one of them in dry weather, which in hindsight tells me nothing about the half of the lot I would actually want to build on.

1priya_n21PO1C

So the income here is basically zero for years. I keep looking for the version of this where money arrives monthly and it does not seem to be land.

0ryanmck27SC2C

The one photo from the road is a tell I did not know to look for. On the licensing side I am learning how listings get built, and an REO with no soil data and no walked photos usually means the agent got assigned it by the asset manager and is servicing it at minimum effort. That agent is also the person most likely to tell you honestly what the seller will take.