Sunnybrook Property
An interesting case study concerns an approximately 1/3 of an acre lot in Sunnybrook Estates. A client had called me and said a neighbor had called him and asked if he and his wife would be willing to sell a 1/3 of an acre property behind the creek at his house on 2-1/2 acres that was next to the prospective buyer’s home. The seller asked me to represent him on the sale of this property. The seller instructed me that he was giving me a sell order. In other words, he wanted me to sell the property at whatever price I could obtain.
There were challenges associated with this separately deeded property. It was only 1/3 of an acre in a neighborhood strictly zoned for one acre lots. This meant no house could be built on this property. Further, the value of the property was diminished because the property in its entirety was in a floodplain, providing another reason a home or other structures could not be built on it. And, finally, the history of the property did not enhance its economic reputation or prospect. My client had bought the property on the courthouse steps when it was in foreclosure. The owner told me he had purchased the property for $17,000. Because of the limitations of the property, he purchased it at such a low price even though the price of the acreage in the neighborhood at the time was $1.5 million to $2 million.
Armed with this information, I called the neighbor interested in buying the property and explained that I was representing the owner. I proceeded to ask what price the neighbor considered buying the property for. This buyer said they were willing to pay $57,000. I asked the buyer why they were considering making such a low offer. They explained that they didn’t think it was a low offer because the owner of the 1/3 acre only paid $37,000 for this property. I quickly said, “Oh no, he did not pay near that much, he only paid $17,000 for the property.” The neighbor went on to say that this fragment of an acre would have no value to anyone but them because nobody could build on it. In other words, they explained they were the only potential buyer. I responded that there were actually two other potential buyers for the property. One potential buyer was the neighbor on the other side of the 1/3 of an acre piece of land. The second potential buyer was my client the owner. I explained that if an owner does not sell the property, they are in effect buying that property. The neighbor also emphasized the property was still 100% in a floodplain, which made the property of little value. I replied that the most expensive estate properties in the Preston Hollow estate area almost always had part of their property in the floodplain. The reason these Preston Hollow estate properties were so valuable is that they were along a creek or a small linear lake that would flood part of the property after a heavy rain. I explained that an estate property sells for a price per acre, with all the acreage being assigned the same value – the areas in a floodplain and the areas not in a floodplain.
The key to the value of the property is that it has a sizeable enough building envelope to construct large structures. Any remaining land after a home is built is solely for creating privacy or for providing visual pleasure for the homeowner. I mentioned that my client has a very large home and accessory buildings, so they did not need the land across the creek to build on; however, they sure enjoy looking at the land. I also explained that if my client were to ever sell their estate home, their 2.85 acre estate lot would be valued for the entire acreage. If the land was valued at $1.5 million an acre, they would receive $500,000 less if they had previously sold off this 1/3 acre of beautiful land of theirs behind the creek. I did agree with the buyer that they were right that the property had no real value if it were isolated and not attached to another larger property with land out of the floodplain. In this case, however, this 1/3 of an acre property had value to the owner because they enjoyed looking at it, and it added real economic value to their property.
One thing I have always understood is that the owner of a property has the advantage in any negotiation with a buyer. If a deal falls through, the seller still has the asset and the buyer goes away emptyhanded. I suggested to the buyer that if they made an offer, it would be a more attractive offer if they included in the offer a deed restriction placed on the property that prohibited any cross fences or other structures for a period of 10 years that might interfere with my client’s view. I explained that it might be easier to pry this property away from my client if my client would still be able to enjoy their same view of the property. I also explained to the neighbor that they would not be giving up anything of value because they too wanted to keep the property open just to use it as an additional garden or lawn for their home. The neighbor then agreed to pay approximately $450,000 for this 1/3 of an acre property and include a deed restriction that prevented any cross fences or additional structures for 10 years. The neighbor’s purchase price was slightly less per acre than the other acreage in the neighborhood, but 25 times as much as the seller paid for the land and 8 times as much as the buyer originally thought was a good offer for the property.
I was able to successfully execute my client’s sell order, which they were pleased with. The neighbor was able to purchase the property that increased their enjoyment of their home and for a purchase price a little bit less than the real economic value it added to their property. A strategy was executed that pleased both parties, was economically beneficial to both parties, and for a price that far exceeded what the seller ever anticipated.
Contact Douglas Newby to Learn About Other Interesting Case Studies Listed Below
- A one acre lot property set a new high price per acre record in 2009 when the real estate market was in a slump. This record held for 10 years until the price surge during the pandemic.
- Turtle Creek lot sold at a higher price than a 4,000 square foot home on a much larger lot overlooking Turtle Creek in the same Turtle Creek Park neighborhood.
- Northern Hills house sold for more per square foot than any comparable size home in Highland Park or University Park.
- Highest price sales in many specific neighborhoods – White Rock Lake
- A small architect designed midcentury modern home sold for over $1 million in a $150,000 neighborhood.
- Crespi Estate.
Discuss Representation of an Architecturally Significant Home with Douglas Newby
