I was reading a story in the Washington Post (free registration required) about a developer who wants to buy up several square blocks of single-family homes to build high rises. How does such a developer go about calculating how much to offer each owner? Since they are planning on tearing down the existing structures, are the offers based solely on lot size? Would Jonny Doublewide and Sally McMansion both get the same amount of money if their lots are the same? I can see people getting pissed off either way; on the one hand, one house is clearly worth more, on the other hand, except for the resale value of the granite countertops and the Sub Zero fridge, the developer isn’t interested in the house, just the land it’s on.
IANA real estate expert, but my understanding is that offers are generally based on the “fair market value” of the property. The developer would have an appraisal done on the property and start negotiations from there. If the owner stubbornly refuses to sell and threatens to block the whole project, the price might have to be negotiated upward.
Or the devoper will [del]buy off[/del] convince the municipal government that the development will benefit the public and it’ll be taken from the owner without their consent.
And public good can continue to be defined as “expanding our tax base”
There was one case here in Sydney where I am on the developer’s side. One of the cities biggest clubs wanted to expand its already huge carpark, and it planned to buy up a row of houses. Like most clubs, it’s cashed up from slot machine revenue, and it’s a non-profit organisation (in theory), so it has money to burn, and it offered the home owners extremely good deals for their houses. All but one of them accepted.
One old guy refused. Not for sentimental reasons, but he was holding out for more money. The club made a higher offer. He refused again, wanting to go higher still. At this point, the club decided, “Fuck him!” and told him it wasn’t interested in his house anymore. So now, instead of being one of a pretty row of houses, his is sitting in the middle of a huge parking lot, and it’s market value is now jack.
For every cite you find for this argument, I can find 10,000 the other way. People act like developers do whatever they want. Hah, city and local governments abuse their power far more often at the expense of the developers than the other way around. It doesn’t make the news the 10,000 times a year that some local official says, “No, I know what the law or rule says, but I don’t like it and you’re not getting a permit until you do it my way.” So, your choice is to either “do it his way” or wait for his comission to end. Guess which one happens.
Edited to add: The neighborhood would have to be bought house by house. Which is a real pain in the rear b/c obviously as soon as people find out you’re trying to buy the whole thing they can become really unreasonable. Yes, it is absolutely their right to drive up the price of buying them out, but some people are just crazy, as TheLoadedDog said.