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Michele Talks Land Assemblies

Posted by Brad Fry on July 6, 2021
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Warning! ;) This is a digitally automated transcript of the show so there will be mistakes throughout - including the spelling of Michele's name!

 

Curtis Pope: 

Please enjoy this replay of last year's July 4 episode of The Cummins Real Estate Group show. It's another Saturday morning. That means it's time to talk to Michelle Cummins here on the Cummins Real Estate Group show. How you doing, Michelle?

Michele Cummins - PREC: 

It's all talk, talk, talk, talk and talk. Good.

Curtis Pope: 

How many coffees Have you had this morning?

Michele Cummins - PREC: 

I've actually had like, three, four. I'm going on my fourth one right now.

Curtis Pope: 

Yeah, you see it. You seem a little more energetic today. Not that you're not energetic most days. But you seem a little more today.

Michele Cummins - PREC: 

You should see me I'm bouncing up and down on my chair right now. Hopefully doesn't make too much noise for everyone. so far.

Curtis Pope: 

So good. We're good to go. Right now.

Michele Cummins - PREC: 

You must be so excited because you're going headed off to the wine country. Yeah,

Curtis Pope: 

once once we're done here, I'm not counting down the minutes or anything. Don't don't don't think that I'm counting the minutes

Michele Cummins - PREC: 

like Michelle This is.

Curtis Pope: 

Once I'm done here today, it's into the escape. And we're gonna head off to two a Soyuz in wine country.

Michele Cummins - PREC: 

Dr. Romney, she you know why she's so healthy because she she owns that winery. No wonder. A glass of wine a day keeps the doctors at bay,

Curtis Pope: 

they say that a glass of red wine every day is actually very good for your your cardiovascular system. But who can stop but one,

Michele Cummins - PREC: 

that's the problem. I'll just have an apple in one hand and a glass of red wine and another please,

Curtis Pope: 

there you go. Exactly. And everything will be good, the body will be all sound.

Michele Cummins - PREC: 

So this show is all about assemblies.

Curtis Pope: 

This is good, because this is something that's had my attention but because the people are selling their homes in my neighborhood. And I know that there's the two houses down as a new house being built. And there's like four or five of us in the middle. Now what if we all got together? So you're gonna answer a bunch of questions for me today? Oh,

Michele Cummins - PREC: 

yes, it's so exciting. I love land assemblies, I usually always have two going on that I'm putting together, because I know so many developers, but I, I love the landowners, like I I get excited finding the good locations, and then going knocking on door on the doors of the neighbors, you know, sending out flyers if I don't catch them, and really working on assembling the properties to put on the market for the developers, you know, to shop around to the developers. So that's really exciting. And when you do it, pre MLS like exclusive, like a pocket listing, you get the developers attention, and it's like, Okay, this is serious, this is a good, you know, pretty much everything has been done for them all the layout of the potential, you know, it's all there, because that's what I do. And I, you know, sit with the developers and show them you know what it is, and it's really exciting. So I, I love working on land assemblies. So okay, so what are land assemblies? How does it benefit you and how to sell your property that way? So let's go to it or get to it. Right, right. Okay. So what is land assembly? So land assembly is a process of forming a single site from a number of properties, typically, for economic development purposes, right? Working with property owners and other stakeholders to combine properties, it can create larger parcels of land that's more favorable for development projects. So that's why you would want to do it. Or you may only be able to fit two, let's say, lots or two. Let's say there's a townhouse or multifamily high density, whatever it is, what if you could only fit like three on your property, but if you were combined with your neighboring property, all of a sudden, they could fit two or three more on your property, which raises your property's value. So you know, that's how does it benefit you. They sell for more per square foot, the land and obviously, what the current use of the property is being used for, which means more money in your pocket, and more profit. Who doesn't like that? No, I

Curtis Pope: 

mean, that sounds good to me.

Michele Cummins - PREC: 

So a lot of people like will have realtors knocking on their doors, like like me. And they may say, or she say, you know, representing, they may be representing the developer, a lot of realtors do that they actually are hired by the developer. And the developers go find me I need a townhouse project in East Abbotsford, or whatever it is, right? And so they're actually commissioned to go find the property for the developer. So there's that way of doing it or or there's, like, most how I do it is I'm actually going and I'm wanting to seek out to put them together. So you got to so it's helpful to ask the question to the realtor. Are they working on behalf of the developer? Like what's the situation there? Right, and there's lots more questions to ask the realtor, but it could be the developer knocking on your door as well that they're interested in purchasing your property as part of the land assembly. So the next question is, what should you do? Well find out as much as you can from the realtor or the developer about the assembly, including Who is behind it? So if it's the realtor, you want to know who the developer is, what is its polygon? Or, you know, there's a lot of major developers and then there's, you know, the one off developers or you know, there's different levels right of everything. So find out who the developer is, is it the city hall, or school board or other government authority? You know, it could be a multiple, it doesn't have to be just a developer, there's other people who might want to develop your land, how much land is being assembled? That's a very good question, what is going to be built on the property? So for instance, is it going to be townhouses, low rise, high rise? What is permitted by the current Community Plan? We talked last week about the official Community Plan, which is not your current zoning, but the future zoning of the property? So what is that for your neighborhood? Who else this is important? Who else in your neighborhood has signed a sales agreement already, for the assembly? Do they have any contracts in place with this realtor or the developer, the timeframe for the development, you want to know the timeframe, and whether the realtor wants to represent you, obviously, I mentioned that or the buyer, the developer, make sure you get that information. You know, you can't do represent both parties. So you always want your own representative. That's very important. And so ask the realtor to leave copies of all documentation with you for your review, if they don't have it, ask them to either drop it off another another time or email it. But you want all of that, including marketing materials, the listing agreement, proposed contract, proposed development, anything and everything they have on it already. And then call me so I can protect you, and make sure you're getting a fair price for your property, right. So the these are complex documents. I mean, if they come over, and they already have all the documents, and they want to meet with you, and they want you to sign on the dotted line, definitely do not do that. You need a representative that has fiduciary duties to you taking care of you. So very complex, take the time to read and understand them in order to properly you know, understand the situation, you don't want to inadvertently find for instance, like, let's say, let's say it's a realtor, and, you know, let's or developer, these who your agreement or you know, there's all these fine lines or fine things in the contract that the developer is working on their benefit for their benefit, right. So, you know, they're going to, they're going to sometimes make it sound all great for you. Yes, it's great in many ways, but there might may be things in there that are not good for you like a two year listing agreement, right? That's That's too long. Usually can't cancel them right at once you sign it, you can't it's a legal document. What if they come in and try and put an open ended subject removal date in a contract, that's another one, meaning that it would have tied up your property indefinitely. Like that's horrible. Developers are always out for their best interest, as I said, and that is understandable. So you need someone like me representing your interests and protect you don't assume that you can void a contract because you didn't read it before signing, you will have an uphill battle in court on that front. So don't, don't be deceived. Don't rely on the buyer's realtor or other third party to explain it to you in place of you're actually reading it and having it explained to you by someone who has fiduciary duties to you, and are looking after your best interest and has obligations to you, such as myself or another realtor. So I want to go on, but I'm going to wait to the next segment to talk about the developer's goal and to continue on the land assembly chat that we're having.

Curtis Pope: 

Okay, that makes perfect sense. And look at you being really mindful of time because we're so bad at that.

Michele Cummins - PREC: 

Well, I'm thinking of one country for you there.

Curtis Pope: 

And I'll do my best not to be counting down to that. You keep reminding me of it.

Michele Cummins - PREC: 

I'm glad I'm here for that.

Curtis Pope: 

Well, I know you enjoy a glass of wine now and then too, so I know you understand.

Michele Cummins - PREC: 

Yeah, it's got the juice.

Curtis Pope: 

Exactly. Alright, so if people want more information from you on maybe they have questions about land assemblies, what

Michele Cummins - PREC: 

can they do? Michelle cummins.ca.

Curtis Pope: 

All right, we're back with more right after this. She Segment Number Two here the company's Real Estate Group show with our star Michelle Cummins and myself Curtis Pope. Now quick question as we get back into land assemblies here. Now when you go into a land assembly and you've got your neighbors that are now in this are you kind of all equal partners In the transaction, how does that work?

Michele Cummins - PREC: 

equal partners as in you each want to benefit and you each are in this to make it work right hopefully together, but not equal financially as far as what value is put on each property. So that's a good question, Curtis.

Curtis Pope: 

Okay, cuz I was wondering about that I'm like, do you just do you guys split the whole thing you know, equally? Or does it come down to the value of each house? Now it's appraised

Michele Cummins - PREC: 

few things. prequels usually don't step in at this moment for land assembling, because it's really a unique way of appraising, which they don't really concentrate on. But the there's a few things. One thing is is it ready for development right away, will they be demolishing the property right away and moving forward with their development. Now, in that case, they would rather have a smaller house a shack or nothing on the property because it's less demolition costs, if there's a big Taj Mahal or that you know, an older home, that may have some hazardous materials inside and now it's going to cost them more to demolish it. So all those costs go into their end result and their profit margins and and what they look at. So they do look at those things. The largest thing is how many units can fit on each lot, and which lot is more is is of the utmost importance for the development, or the land assembly to come together. So if let's say there's a corner property, and that corner property, if that corner property didn't move forward along with the other, let's say four properties to the north, south, east or west of it, then then that one is the most important and so they they're valued higher, right, so that was the the most important one to get. And so the other other neighbors should be like, okay, we want to, you know, we want to be nice to you, neighbor, because it's really based on your you wanting and moving forward with selling. And we know your property's worth more than ours, because it's the most important or maybe it's the largest, it's also per square foot. So there's a lot of variables and adjustments that you got to make for value. A lot of neighbors just want all the same price. And they're like, well, we're in this together, we should all get the same amount. We you know, if it's a total of 5 million, we should just split it all evenly. What? Well, that's not realistic. So yes, you have to, you have to look at that. And it does take having a couple get togethers with with the realtor and explaining it and going through the whole process, what it looks like, and why the values are different, and everything. So yeah, hope that answers your question. It does. So

Curtis Pope: 

let's move on to what will you add now for the second half of this, this segment here with what you had about land assemblies.

Michele Cummins - PREC: 

So the developers goal is to tie up your property for as long as possible without paying you anything unless the proposed development goes ahead. So be aware, the carrot, which is dangled in front of you is the potential to get a lot of more money for your home than its normal market value. So sometimes you may feel rushed to make a decision or excited so you just want to say yes to it. But be you will be aware, the developer accomplishes this sleight of hand by the use of subject conditions, which are terms which make the contract binding on him only when they are removed. So the typical subjects conditions are one a certain number of neighborhood owners signing on. So like, throw out the one I had in Coquitlam, I think I had 10 neighbors all together. And you know, a lot of them based on it, only if at least five of their neighbors sign on will I move forward. So that's a typical condition with land assemblies, because they have to go to each owner one at a time, right. The other one or another subject condition is satisfactory phase one environmental site assessment. So there's a few phases here with environmental site assessments. And it's very important and needed for developer to have that another subject is satisfactory feasibility study. And that one, just everything could be rolled into that one right there. Because the feasibility study, it's feasible to them that developer for what they want to use it for. So it's very open ended. And it would be pertinent to ask questions, such as all those questions. What are you going to use this property for? What are your goals? What's your timeline, because you can go to the city, you can know if it's feasible before you tie yourself into something for subjects for three months, right? Like the three months is, is is kind of an average normal for subjects for developers, but they will try to get more and sometimes it can be less than that depending on how far the development is so far in the process. So other due diligence, searches and investigations for the developers such as title reviews, soil sampling, site assessments, you know, all these things that that they need to do in order to make sure it's feasible for them. Often it can take a half a year or more to complete everything. So in the meantime, your property is effectively tied up three months is quick, but six months, you know I've done many, three months, but there's a lot six months, it can't be sold at someone else in the whole time. So you are pretty much tied to sell it to that developer. So I'm going to talk about how that can be profitable to you in case they walk away. Because you never know if developments going to stop or be the city's gonna change their mind or you know, cause changes in the meantime, and all those good things. On occasion, the developer will want an option registered on your property as well. So that's something else we could talk about at a later date. Or somebody can call me if you have questions about that. But that is very typical, when you'll see that they'll want that option in the contract, the sellers goal, let's talk about that. Obviously, it's to have your property under contract for a shorter time as possible. So here you're struggling against the developer, why long you want in shorter, and to get some non refundable compensation from the developer, if the property is going to be tied up for more than three or four months, let's say options cost money, and there is no reason to grant one to a developer and not get paid something if the sale never materializes. And trust me, they are willing to pay it. And it shows there, they're promising, it shows that they're serious, they're not just going to waste your time and tie up your property while they're going and working on five other potential properties and leaving yours You know, time is of the essence. And what that means is they have to prove that they are doing their due diligence as quickly as they possibly can in a timely fashion and manner. And so they they should be willing to put up some money in the beginning. So I'm and I have clients who had their property tied up for for months and months and months, but they got a good chunk of money direct to them upon acceptance of the offer. And they got to spend that right away. And so they didn't mind waiting months and months to find out if they wanted to buy it or not because they got something over and above the purchase price put in their pocket for that time to hold it up. So there's all sorts of things you can do. So other considerations are payment of the deposit on subject to removal date. So now months have gone by maybe half a year, the deposit should be minimally five to 10%. And that I'm I'm saying that's very minimum of the ultimate purchase price. And it should be non refundable and preferably released to the seller forthwith like right away upon subject removal. If not, it's held in the real estate brokers or developers lawyers trust account, it's much better to be given to you stipulate that it'd be held in an interest bearing account, though, if it isn't given to you. And that interest accrues to you. If the completion date is more than three or four months down the road, the deposit is to be held in trust at a clause requiring the developers brokerage or lawyer to release the deposit to you or your lawyer right away. If the developer fails to close on the completion date, you don't want you know the developer to walk away and then all of a sudden you need their signature to release that deposit that trust to you. Because what if you never get that signed it It could take forever right so make sure it's in the contract properly. I once had a development site five acres and it wasn't going to be closed for a year out so I made sure my client got $100,000 upfront you know, to have to wait 12 months for it to complete so there's all sorts of things you can do you got to have somebody there to help you negotiate all that so what about a rent back so often the developer for he'll he'll not want to or can't develop it for at least a year or more after the completion date. So in that case, you know if your house is livable during the period and seller, I mean you'll negotiate you could negotiate some free rent maybe for a year or more but but they will want to rent it and and also what products you're you know light fixtures and appliances and countertops and flooring you know there might be some sentimental items in your home that if they're just going to demolish it you will want in the contract that you can take you have the option of removing and taking it with you when you leave, there's that possibility to unless you're going to leave before they're ready to develop and they still want to rent it out and have some money coming in to cover their interest on whatever development mortgage they may have. So capital gains and other tax implications so you definitely want to talk Make sure your accountant you ask your accountant and have them review things and advise you on that before signing the dotted line okay before accepting an offer because you just don't know if you're going to have some capital gains on on an acreage maybe you have an acreage and you know, GST is very complicated and so you definitely want to talk to your accountant before committing to a sale. So what is out there for you to acquire. So, there there's a lot A lot of things out there. I mean, a lot of people say, Okay, I'm going to sell, but I'm going to, I still love this area, or my kids are still going to school in this area, I need to buy in this area. So what's out there for me to buy if I sell. So it's important to know, and not just be excited about the dollar signs. Because you know, you just want to be aware of your future and what you can move into. So that's a good thing to do before you sign on the dotted line as well. And as I said before, about, you know, not making the don't make a rash decision. Don't Don't just jump in, because it's very exciting. And it's good, be excited. But, you know, take some time to review everything and make sure everything's good developers and realtors are always, you know, pushing for a signature Now usually right? So but take your time and assess the situation. Consult with your lawyer, your accountant, obviously your realtor. In most instances, it's the land assembler that is coming to you. Rather than like when I knock on your door saying I want to put together assembly it's usually the other way around, though. So just be prepared and get advice. So land assemblies are definitely here to stay. We've got like 40 to 50,000 people moving in the lower mainland, the yearly and every politician in his dog is in favor of increasing density. So it's wise to at least be aware of the basics if you're if you find somebody knocking on your door, or you're thinking about doing it yourself. And I want to end our show with a quick quote. It's from Willie Nelson. If you wait for tomorrow to follow your dreams by the time that you get there they are gone.

Curtis Pope: 

true is that

Michele Cummins - PREC: 

Yeah.

Curtis Pope: 

And before I forget because we forgot something here today being that you were born in the US. Happy Fourth of July. Oh,

Michele Cummins - PREC: 

thank you. The fireworks are going off in my head.

Curtis Pope: 

Bit of a different Fourth of July just like it was a bit of a different candidates.

Michele Cummins - PREC: 

Right. I'll take it

Curtis Pope: 

Alright, if people want more information about land assemblies, about open houses, things like that, what can they do? They'll come in and join us again next week and we will talk more real estate in order to unlock your real estate potential on his show where real estate is maximized. Thanks for listening

 

If you missed last weeks episode where Michele talks about A Real Estate Cornucopia , please go back and take a listen - it's well worth it!

 

Click Here to listen to the full Episode & Previous Episodes!