Selling Home to a Developer

What should you consider when selling home to a developer? Is price the only factor? How do you determine what price is right?

By Ilyce Glink and Samuel J. Tamkin

Q: Our neighbor sold his home to the commercial business that borders his property. He sold it after they approached him with an unsolicited offer. The neighbor was told the business wanted to remodel/redevelop the property and wanted “green space” between them and the neighborhood.

We’ve now been contacted by them, too. Do you have any thoughts, do and don’ts, recommendations for us about how to consider any offer that is made? How does one arrive at a value for a property that would undergo a zoning change from residential to commercial?

Considerations when selling to a developer

A: The first question is what you should consider when selling home to a developer. Start by contacting your former neighbor to find out how much he got for his property. Check online. ThisThis information might be published online (check with your county’s recorder of deeds office) but in some areas the sales price for a home can take awhile to publish or, in some cases, it’s not publicly available.

Once you know the price he got for his property, you’ll have a starting point to determine what your home is worth. It may not be an exact comparison, as one property might have amenities the other lacks, but it’s helpful. And, if you can find out what the commercial company really has in mind for the property (check with your local building department to find out what could be built if all of the properties together were zoned commercial), it will help you understand how much your property is worth to a homeowner or to a commercial builder.

Determining the value of your home

Get as much information as you can about property value. Check websites but also talk with a few local real estate agents (both residential and commercial agents) and see what comes up in terms of valuations. When you interview these agents, ask them to give you an idea of what property appreciation looks like in your neighborhood. Ask them to tell you what price they think you should list the home for. And, lastly what they think the sales price should end up at. Calling these agents doesn’t obligate you to hire them. You’re simply talking to them, getting to know them to see if they and you can work together and evaluating how much they understand about local market conditions.

Once the commercial company makes you an offer, you’ll be able to judge whether you want to accept their offer, negotiate it based on what you’ve learned, or simply say “No thanks.” Without the information, you can’t make an informed decision.

When it comes to zoning changes, reclassifying property from residential to commercial use can affect price. You should know that a change like that usually takes place on large parcels or many parcels all at once. For example, if you have farmland and want to build a shopping center on the property, if you have enough farm parcels grouped together, you would then go to the governmental body that handles redevelopment to petition for the land use changes. Usually in this situation, the value of the land goes up exponentially.

How does a change in zoning affect your home’s value

But in your circumstances, you are one lot of many that could be part of the rezoning. The developer will spend quite a bit of time, money and effort in putting the parcels together. They will work with government officials in rezoning the property. We don’t think it’s likely that you can value your property as if it was already rezoned but the developer might give you a premium just to get all the land together for whatever project they are designing.

The last thing to keep in mind is what happens if you don’t sell but all of your neighbors do. You could wind up with a small parcel completely surrounded by a commercial development. If that happens, your value could tank, as there are likely to be few, if any, people who’d want to buy your property. These are some of the items you should consider when selling a home to a developer.