Real Estate – Vacant Land Plus Cash Equals House

If we check out the Trader’s Corner today we will find a very basic formula that works like magic. As the title suggests land plus cash can be traded for a house easier than land alone. The reason this works is because it combines a low priority property, land, with a high priority commodity, cash. When we set priority levels, we are speaking of the acceptability scale of commodities. Let’s agree that all “things” are commodities. Cash in our economy is universally acceptable so it would be number one on the list for most sellers. Precious metals would also score high on the list because they are easily convertible to cash.

Many things are quickly converted to cash and therefore are more acceptable than other less liquid assets. A great home in a good neighborhood will come in higher on the list than a vacant building lot. However, the circumstances of ownership can impact the desirability of a property when trading real estate. For example, a vacant lot without a mortgage may be more desirable than a lot mortgaged for half its value.

Understanding this basic principle will help facilitate a trade. Both parties in a trade do not want the property they have. Worded a little differently, they want what the other party has more than they want what they have. I hope that makes sense.

Sellers are trying to get rid of the real estate they own so they can do something. They may need a larger or smaller home, relocating to another city or getting a divorce. People sell properties for all types of reasons. It helps to understand the motivation of the other side if you are trying to acquire a property by trading.

Property trades are more common than you may think. They would be much more common if sellers gave it a little thought. If you have a smaller home and want a larger home, why not look for someone that is downsizing? But the other side must want our property, right? Not necessarily, remember they must want what we have more than they want their existing property. I showed several homes this past week above the medium price range for my area, well okay, double the average. The point is more than one of these estates had been on the market for over a year. Do you think any of the sellers would not entertain taking an unencumbered vacant lot in trade?

So here is how the formula lot plus cash equals house works. Let’s assume we own a lot worth $50,000 and we want to trade it for a home in the $400,000 price range. We would advertise: HAVE: $350,000 cash and vacant lot worth $50,000. WANT: Singe family home.

Have you ever seen an ad like that in the real estate section of the Sunday paper? Probably not, that is why it will raise more than a few eyebrows.

But we do not have $350,000 in cash you protest. What would happen if we made a $50,000 cash down payment and bought a home? We would put a $350,000 loan against the home we are buying. Same thing is true in a trade; all we do is make it a part of our offer.

Why would a seller do this? It goes back to their circumstances of ownership. What if the seller has already bought another home and is making two house payments? The vacant home they are trying to sell has a $2,500 per month house payment, utility bills and landscaping expense. It could very easily be costing $3,000 every month the home is on the market. Along we come and offer to give them cash and a free and clear lot without mortgage payments. Poof, we traded for a house. I told you it would like magic.

Will it work in reverse? Absolutely. Have: Single family home in desirable neighborhood, will trade for land. This time we do not mention cash until someone steps forward with land.

Selling a home is a lot easier if you are flexible about how you get from point A to point B. If you take off the blinders and really look at what you have, the solution may present itself.

Article Source: http://www.propertymagnate.com/articles

Debbie Rood is a Realtor in Louisville, Kentucky Derby City USA. She is a residential real estate specialist. She publishes many articles on real estate and mortgage financing on her web site www.debbierood.com/

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