Consider buying rural land in 2009

The year 2008 started out not so good for a lot of people and ended up worse than anyone imagined.

We begin 2009 afraid of what’s coming. Most of us are scared about our income. So we are spending less and beginning to horde. Cash in hand feels like a good long-term investment. Read more »

What price should you offer?

Once a buyer has defined the acreage and boundaries of the seller’s property legally and on the ground and determined the nature of the seller’s ownership, the question of offering price presents itself.

For most buyers, their thoughts on offering price are anchored in the seller’s asking number.

That’s not the right place for the buyer to be most of the time.

I’ve come to the conclusion over the years that most buyers do not need to buy most properties at which they make a purchase run. A buyer may need to buy some property at a particular time, but not necessarily a particular property. A buyer’s level of need always depends on his BATTP—Best Alternative To This Purchase. The better a buyer’s BATTP, the more negotiating power he’s likely to have.

Buyers can choose among properties, particularly in a buyer’s market.

If, as I believe, most property purchases are essentially discretionary and voluntarily from the buyer’s point of view, it follows that buyers should have a formula for determining a property’s right price from their perspective. Read more »

Rethinking stocks: Put land in a real-estate IRA for retirement

I’m sure there are three people in America who figured the stock market just right this year and are swimming in money like Donald’s Uncle Scrooge. I am not among them. And neither are millions of others who didn’t duck out. Read more »

Earnest Money: More may be less, and vice versa

We buy and sell property in an odd and awkward way. Among the puzzling steps in the process we use is the packaging of earnest money with our purchase-offer contract.

Earnest money is a buyer’s deposit that’s held in trust, pending ultimate acceptance or rejection of the offer. It is parked in a trust account where it’s not used for any purpose before or during escrow, which is the time when the purchase contract is in effect.

Few other types of purchases involve buyers depositing earnest money.

Real-estate brokers, representing either buyer or seller (but usually the latter), hold these deposits in trust. Real-estate lawyers also have trust accounts. I’ve always felt most comfortable as a buyer putting my earnest money in my lawyer’s trust account, and I’ve never had a seller complain.

A buyer dealing with For-Sale-By-Owner sellers should use his own lawyer’s trust account. Buyers should never give earnest money directly to sellers. I have seen FSBO sellers pocket such deposits when the sale fell apart. Read more »

What is the property that is being sold, and how do you know?

Both sellers and buyers need to understand what is being sold.

When a seller lists property with a broker or advertises as a FSBO, he should establish both the nature of his ownership and its extent.

Real-estate law conceptualizes property as a bundle of rights. A seller may be selling all his rights in a property or just some, with or without limitation in either case.

One or more rights can be severed–sold, leased or given away. A common severance involves separating subsurface minerals from the surface. In some states, where surface is owned by one party and subsurface by another the situation is referred to as a “split estate.” I’ve evaluated properties where ownership of timber, water and wind have been separated from the bundle of surface rights being sold.

The sale, lease or donation of rights in property should be recorded. Most mineral sales and leases are, but I’ve found sales of timber rights not recorded and not disclosed.

A complete bundle of rights in property is referred to as “fee simple absolute.” The shorthand is, property “owned in fee.” Where subsurface rights have been severed from surface rights, that property is not being sold in fee. Read more »