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Developers want to buy my home
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# 1
glittermonster
Old 06-12-2012, 9:43 PM
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Default Developers want to buy my home

to knock it down and build new flats.

I'm one of three maissonettes over an empty gym/nursery - mine and another are privately owned and the third the managing agent owns and is rented out.

The managing agent have been approached by a property developer who wants to buy all 5 properties (3 maissonettes, nursery and gym) and start again building 8/9 flats.

The managing agent has said the property (2bed) is work £150k (I paid £147k 3 & 1/2 years ago) and to have a think and let them know what we'd like. Apparently the property developers will cover all costs of selling/buying/moving.

We werent looking to move just yet (maybe in a few years) but this seems like a great chance to get out without having to renew the lease (its leasehold) and decorate/pay solicitors etc.

We are having a look around to see how much £ we'd need to buy a similar properly - which I think would be a 2 bed house as we have an outdoor space here in 3 directions - first floor back, 2nd floor front and back - which made me buy this property instead of other flats I looked at.

Any thoughts or questions we should be thinking about are welcome.

We are talking to next door over the weekend, I think they'd be happy to sell (for the right price) we need to agree on a price we'd both like and take that back to them I guess - and any other questions.
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# 2
terrencetrentderby
Old 06-12-2012, 9:53 PM
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Ask for £165k and see what they come back with.
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# 3
Clearlier
Old 06-12-2012, 10:15 PM
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Do some research to find out how prices have changed in your area and work out what your property is likely to be worth on the open market. Also, most EA's offer free valuations. Make sure to find out what they think it would sell for though not what they would market it for.

Find out what it would cost to buy whatever you would move into.

See if you can find out any more information about the developer and what they want to do with it. If your building provides them with a unique opportunity and they really want it then you're in a much stronger position. If this is one of many possibilities for them then a silly asking price will just send them away for good.

Armed with all that information you can decide what to ask for but remember it's a negotiation (unless you says it's a 'take it or leave it' price).
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# 4
mikthe20
Old 06-12-2012, 10:28 PM
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In pricing negotiations I always find the first to give a price has the weakest position - they show their hand first. So, if I were the OP I'd just say "we don't want to move, we're not interested". So force them to make an offer first. They can't offer you less than what they claim it is worth and will have to offer some sort of premium to make it worthwhile. So then you'd have a starting point. I'd then add a good percentage to their offer (say 50%) and negotiate somewhere in between.

Alternatively, and I know of a recent case, just refuse and every time they come with a high offer say it's not enough. The person I know of who has done this in a similar situation has got a really, really high price, stupidly high (about 3x the value of the flat!), but then he's the last one refusing to sell and has the buyer by the short and curlies. High risk, but potentially high reward.
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# 5
eddddy
Old 06-12-2012, 10:29 PM
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Hi glittermonster

I think the managing agent is approaching this the wrong way.

The general rule of thumb is that a developer expects a site to cost between 30% and 40% of the final value of a development.

So, for example, if the 8/9 flats are expected to sell for £2m, the developer will expect to pay about £700k for the site. In this case, that £700k would be for all 5 leases plus the freehold - so it needs to be apportioned accordingly.

A more sensible method would be to instruct a land agent to do a valuation of the planned 8/9 flats, and use that to work out what the site is worth.

Then the land agent can work out what percentage each leaseholder should get (based on the size of their property etc). And then the leaseholders can decide whether that's acceptable.
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# 6
eddddy
Old 06-12-2012, 10:51 PM
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Quote:
Originally Posted by mikthe20 View Post

...So, if I were the OP I'd just say "we don't want to move, we're not interested". So force them to make an offer first. They can't offer you less than what they claim it is worth and will have to offer some sort of premium to make it worthwhile. So then you'd have a starting point. I'd then add a good percentage to their offer (say 50%) and negotiate somewhere in between.
...
Hi Mikthe20

In these circumstances, I would be very careful about taking this approach. In this case, It sounds like the developer needs to reach a deal with 5 leaseholders and a freeholder. If the developer is faced with 6 people all "playing hard to get" and with unrealistic asking prices, he is likely to give up pretty quickly.

I would suggest that the OP tell the developer that he is really keen to sell to him - as long as they can agree the right price. And use a land agent to determine what that right price should be.
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# 7
Ivrytwr3
Old 07-12-2012, 6:40 AM
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The original offer is a tester - you are getting £3k + moving costs for leaving your home on someone elses terms? I don't think so!!

You are in a very good position as they want your home. I owuld want what i pad for it, movong costs and extra payment!

How about you look a straight one for one swap? They get your place and you get one of theirs???!!!! Or at least a huge chunk off - it all depends how much they are worth and how bothered you are about actually moving. The balls in your court so to speak.
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# 8
getmore4less
Old 07-12-2012, 6:55 AM
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Quote:
Originally Posted by Clearlier View Post
Do some research to find out how prices have changed in your area and work out what your property is likely to be worth on the open market. Also, most EA's offer free valuations. Make sure to find out what they think it would sell for though not what they would market it for.

Find out what it would cost to buy whatever you would move into.
It is a development plot so will have very different value to the open market sale.
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# 9
getmore4less
Old 07-12-2012, 7:01 AM
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Find out who owns the freehold and the ground floor leases.
check if any planning has been applied for.

How busy are the developer, what are their timescales.

I uspect the managing agent are going to do well out of this on the current offers.

or pay someone independant on the development potential.
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# 10
martinsurrey
Old 07-12-2012, 9:04 AM
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Quote:
Originally Posted by eddddy View Post
Hi glittermonster

I think the managing agent is approaching this the wrong way.

The general rule of thumb is that a developer expects a site to cost between 30% and 40% of the final value of a development.

So, for example, if the 8/9 flats are expected to sell for £2m, the developer will expect to pay about £700k for the site. In this case, that £700k would be for all 5 leases plus the freehold - so it needs to be apportioned accordingly.

A more sensible method would be to instruct a land agent to do a valuation of the planned 8/9 flats, and use that to work out what the site is worth.

Then the land agent can work out what percentage each leaseholder should get (based on the size of their property etc). And then the leaseholders can decide whether that's acceptable.

that is far far far to simplistic.

the old 1/3 1/3 1/3 rule works fairly well for out of town green field development, but this is a regeneration project so can have very different profiles.

If they retain the core structure but refit and add new levels the build cost will be lower, but the land cost will be higher.

If they have to level the site, build costs go up, land price goes down.

If they find contaminated land (which is common, even though the old uses seem clean) build costs go up...

For projects like this (but on a bigger sale) an intuitional seller would use whole project appraisal with a priority return for the developer, above which the land owner would get a sizable overage payment.

This will not work for a single unit, such as yours, the costs would be far too high.

Do as you are, look for a slight upgrade in house + costs of moving to it.
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# 11
mikthe20
Old 07-12-2012, 9:55 AM
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Quote:
Originally Posted by eddddy View Post
Hi Mikthe20

In these circumstances, I would be very careful about taking this approach. In this case, It sounds like the developer needs to reach a deal with 5 leaseholders and a freeholder. If the developer is faced with 6 people all "playing hard to get" and with unrealistic asking prices, he is likely to give up pretty quickly.

I would suggest that the OP tell the developer that he is really keen to sell to him - as long as they can agree the right price. And use a land agent to determine what that right price should be.
I'm only suggesting the OP play hard to get, not everybody at the same time. Also, why should the OP go with a land agent? - the agent will only value it as a normal sale for the normal price. This is not a normal transaction. Why should the OP accept the normal market rate when there is potentially a desperate buyer who is going to make a substantial profit and therefore should be willing to pay a premium above the normal market rate for the flat? Since the developer is going to make a profit, it makes sense for me for the OP to get a share of the profit by getting a premium price. The right price in this situation is not up to some third party surveyor - it is the most that the OP can get above the normal market price. After all, the OP wouldn't be thinking about selling otherwise.
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# 12
glittermonster
Old 07-12-2012, 10:03 AM
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Thanks everyone.

Lots to get my head around!

I am most concerned about being able to afford somewhere comparible 2 beds and outside space
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# 13
mikthe20
Old 07-12-2012, 10:26 AM
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Quote:
Originally Posted by glittermonster View Post
Thanks everyone.

Lots to get my head around!

I am most concerned about being able to afford somewhere comparible 2 beds and outside space
Actually, that's not a bad idea. Rather than money why not tell the developer what property you would like them to buy you instead? But sheesh, don't be afraid to make a profit - why comparable? (ie. no net improvement for you) - you may as well not move then. Find a nice 3 bed you'd like. All the best.
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# 14
glittermonster
Old 07-12-2012, 10:59 AM
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3 beds where I live are about £200k+!!
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# 15
*Robin*
Old 07-12-2012, 1:19 PM
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Quote:
Originally Posted by glittermonster View Post
The managing agent has said the property (2bed) is work £150k (I paid £147k 3 & 1/2 years ago) and to have a think and let them know what we'd like. Apparently the property developers will cover all costs of selling/buying/moving.
Quote:
Originally Posted by glittermonster View Post
3 beds where I live are about £200k+!!
Sounds about right - go for it!
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