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

This is a small case and the least exciting kind there is, which is why it is worth studying. Just land, with no house and no tenants on it. A regional bank ends up owning about 9 acres on a county road after a foreclosure on the prior owner. Listed with an agent at 74, mostly cleared, fence line on two sides, one collapsed pole barn sitting in the middle of it. It sits 104 days with one price cut to 69. Anyone running an alert for parcels over 5 acres across a few counties sees the whole run. The listing has no soil information and one photo taken from the road, which tells you the agent has never walked it. Walking it twice, once after two days of rain to see where water sits, is what makes an offer possible. Offer 58 cash, no financing contingency, 21 day close, barn debris as the buyer's problem. The bank counters 63. Holding at 58 and giving a longer close instead, 35 days, is what closes it, because the asset manager cares more about timing certainty than about the last 5k. Closed at 58 with about 1,900 in buyer closing costs. Debris removal and hauling the metal runs 4,150, with 400 back on the scrap. Perc test 900. Survey 1,750, because the fence line on the north side is not where the deed says it is, which is exactly the kind of thing worth paying for before owning something rather than after. Where it lands: the full 9 leased to a neighbor for hay at 55 an acre on a one year agreement put in writing, so 495 a year, which does not cover taxes. That is fine for ground bought as ground rather than as income. The county allows a split down to 3 acre lots in that zone, confirmed with the planning office in person before the offer went in. No split yet, and likely none for years. What nearly breaks it is the survey. A fence off by much more on the north side means buying a boundary dispute with someone who has lived there for thirty years. What holds up: reading the days on market and the price cut history before deciding what to offer, and walking land after rain. The part still worth explaining is why a bank takes 58 on something listed at 74 when it has already waited 104 days. Somebody lay out the asset manager side.

nicole_adeyemi SS3APRO 13

Answer

joe_delgado5ActivePRO

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.

joe_delgado5ActivePRO

12 replies

luis_carrera CS1CPRO 12

The alert on anything over 5 acres across three counties is the part worth copying. Most people building a search to find deals make it far too clever. This one is a single filter and a lot of patience.

luis_carrera CS1CPRO 12

tashaford30 SG2CPRO 16

Worth clarifying for anyone reading this as a template. When you say cash, do you mean funds already sitting in an account, or a hard money lender who funds fast? The missing financing contingency looks like the reason 58 beat 63, and only one of those two answers actually removes the contingency.

tashaford30 SG2CPRO 16

megan_doyle15PassivePRO

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.

megan_doyle15PassivePRO

raj_mehta14 PF4BPRO 10

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. Almost none of that reasoning is visible from outside the bank, even to someone who reads loan files regularly. Parcel, did the agent ever tell you anything about how the price got set?

raj_mehta14 PF4BPRO 10

aaron_fitz10 PU1APRO 13

This is the shape of deal a newer buyer can actually execute a version of. No occupant to manage, and no contractor or draw schedule to run. The caveat is that 495 a year against taxes means the return sits entirely in the eventual sale or split, which is a bet on that county being worth more later, and that is the one part of the analysis that takes a real opinion to form.

aaron_fitz10 PU1APRO 13

jordan_ellis2CapitalPRO

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.

jordan_ellis2CapitalPRO

aliyah_bActivePRO

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.

aliyah_bActivePRO

stephen_ok9ActivePRO

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?

stephen_ok9ActivePRO

diane_kowalskiServicePRO

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.

diane_kowalskiServicePRO

priya_n21 PB2BPRO 21

So the income here is essentially zero for years. For anyone looking for the version of this where money arrives monthly, raw land is rarely it. The return on a deal like this one is the resale spread, collected once.

priya_n21 PB2BPRO 21

ryanmck27CapitalPRO

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.

ryanmck27CapitalPRO

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