All Topics / General Property / what would you do if a developer rings and asks to buy ?

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  • Profile photo of suavemechanicsuavemechanic
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    @suavemechanic
    Join Date: 2004
    Post Count: 106

    ill  keep this general to protect the players involved but a friend of mine recieved a call from a developer interested in buying his property "at a premium "
    fear and greed are setting in ,any tjhoughts ?

    Profile photo of RobLRobL
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    @robl
    Join Date: 2007
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    mmmmmmmmmmmm .. 4 wot its worth .. ya friend should simply stack up the numbers and .. IF it fits with their strategy – problem solvered … if not .. don't pursue it … its ALL about the research .. some here .. some direct with appropriate folk … probably not helpful .. but given the info .. best response I can give you :-)

    R

    Profile photo of L.A AussieL.A Aussie
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    @l.a-aussie
    Join Date: 2006
    Post Count: 1,488

    Your friend should first do some extensive research on the land values in the immediate area to get an idea of what the value of his/her block is.

    Call all the local agents, check the recent sales either with the agents or at the local Council. realestate.com.au lists a lot of recent sales, but not always the prices.

    This wouldn't be the first time a developer asks someone to buy their land, hoping that the Vendor is uneducated and doesn't know the value of their land.

    It may even be worthwhile asking their Bank for their list of Valuers for that area, then ringing one to do an official valuation. Cost is about $300.

    Then he/she will know if the offer is "at a premium".

    Profile photo of JONCHUJONCHU
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    @jonchu
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    L.A. Aussie makes a good point, tell your friend to do his due diligence, finding out what the property is worth is the main thing. I have this happened to me once. My IP was next to a motel, the owner was planning to extend his motel and offered to buy my property. I  know my areas well, so I knew how much my property was worth. On the other hand there was not much I could do to develop myself, etc, (motel and park next door), so I decided to sell. Make sure your friend stays cool on the negotiation and REALLY gets a premium, I sold mine and got around $25K more than I would have if sold through an agent, etc. Developers know how to “negotiate”, staying cool is the key here.The beauty was also that the buyer/developer did not cared about the current state of the property (I had water damage in the roof and my tenant was starting to complain), so It was a great deal actually. Bought it for $92K  3 years ago and sold $195K… cheering! (without having to spend the $12K on fixing the roof)

    ALL my properties are always for sale even if there is not a for sale sign at the front, I am sure you get the idea…

    Profile photo of suavemechanicsuavemechanic
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    @suavemechanic
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    Post Count: 106

    latest update !
    my friend sold for about 100k above market value,
    most of the adjoining houses are suddenly very run down ( no longer have tennants) and were sold in one lump to the developer .
    my friend has no interest in sitting on the porch with a shot gun hoping for the million dollar offer as he is too busy and would rather buy a house nearby and take advantage of the new development
    notes on due dilligence !
    one thing we found was a scruffy property in this area costs a little more than anticipated
    a nice one costs as much as my friend got for his well positioned roughie
    the old property was beautifully financed
    due to recent interest rate rises the new one will be more expensive per week
    due to long settlement he may have hit his lending limit with the nice bank and have to go lo doc and pay mortgage insurance
    ( again )if he wishes to purchase straight away and not wait till after settlement…..
    settlement is in six months…the tax department uses the contract date not the settlement date for its calculations (never done a long settlement before so that was news ! )
    despite having a contract for sale at $xxx the bank is using the 9 month old valuation leftover from the refinance
    and no they arent going to let the old cheap fixed interest loan slide on over onto the new property
    so its off to the mortgage brokers (again)
    more to follow cheers

    Profile photo of voyagervoyager
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    @voyager
    Join Date: 2007
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    The good thing about when developers buy property, they have no emotion in the deal. i.e. if the numbers stack up and the land can be developed, then you have a deal. If this is more than market value then you really do have a win-win situation!

    Profile photo of mrdenn1smrdenn1s
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    @mrdenn1s
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    Should have woken up and developed the land himself….or held onto the block as the developer would have bought a similar block eventually, as others would…gentrificating the area and driving prices up across the area

    What suburb?

    Profile photo of wealth4life.comwealth4life.com
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    @wealth4life.com
    Join Date: 2003
    Post Count: 1,248

    You never go broke making a profit … good on him he's not greedy and can now move on … why screw the developer when you are making good profits … next deal please …

    D

    Profile photo of cu@thetop[email protected]
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    @cu-thetop
    Join Date: 2007
    Post Count: 36

    Why not screw the developer? Squeeze him for the max-

    "You couldn't afford it Mr Developer – how much are you offering?"

    "What's your best price?"

    "Send your best offer to my solicitor"

    I agree- sit on the property and see what happens.

    Profile photo of mackarmackar
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    @mackar
    Join Date: 2006
    Post Count: 106

    be aware also that developers will often have a lengthy "due diligence" period prior to going unconditional (where they will approach council etc to see if there proposal is going to be considered favourably or not)…this can be quite a few months sometimes… then, they often will opt for a extended settlement date if they can.. to save holding costs
    this means you may have sold at a premium price today, but, by the time the property settles it's 12 months later & prices may have jumped up so your payout figure is no longer so great because  to try then to replace property now, costs more… you're basically out of the market  for a year or so…. not good if theres a boom!!
    just be wary & if you settle on price remember to allow for a standard settlement date also, so you can then go shopping for your next house almost immediately…
    good luck, mackar

    Profile photo of suavemechanicsuavemechanic
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    @suavemechanic
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    latest news !
    found a really good mortgage broker through a selling agent
    ,after three hours at the bank trying to get the deal right ,
    and only limited success and vague promises ……..he was able to make it happen  WITH THE SAME BANK !
    armed with this we asked for a 5% deposit  on the day of auction
     'no definately not, i will ask the auctioneer,yes no problem but every one else will be offered that term  '
    found ourselves bidding against a developer who had a cut off point
    and won the property
    same neighbour hood  better block
    excellent chance for history repeating in a few years
    nice result

    Profile photo of Matt007Matt007
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    @matt007
    Join Date: 2008
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    I can tell you developers will rarely if ever agree to standard or short settlement dates due to the very lengthy times that council take in getting DA/BA approved. A developer won't part with much money until they know for a fact that council is going to let them do what they want to do with the land. They'll use an option document to ensure you don't sell it out from under them after they've started investing oney in a DA, which is fair enough too.

    You can try and 'screw' the developer all you like but a lot of the admin and regulatory requirements are out of their hands so if you want to get a decent deal out of a developer making an approach, keep it realistic otherwise, speaking from experience, you'll lose your opportunity as they'll move on just as fast as they've approached you. Developers will pay you a premium IF its worth it, and as someone pointed out, IF the numbers stack up. That said, yours probably isn't the only property they're chasing, so if you 'screw' around too much, you'll end up with a lemon just as quickly as it could have been a gold nugget. Do your research, be realistic, keep it equitable, and work for a win/win. If you don't want their money you can rest assured someone else does.

    Profile photo of kum yin laukum yin lau
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    @kum-yin-lau
    Join Date: 2006
    Post Count: 342

    Hi, developing isn't as easy as it's made out to be. You make a lot of money if property prices escalate while you're developing.

    Not all developers are out to offer low prices. With your kind of development, it's likely to be a small developer of the mum & dad variety, probably with some handyman skill.

    I sold my project to another 'developer' who's going to live in the old house while the new one is being built. I can't do that myself.
    If I build, which I can, I have to consider GST on sale, which means I need to consider holding on for 5 years, which means some form of funding. Selling now, I realise almost the same amount of gain. I calculated that even if I can make an extra 100K, it doesn't make a huge difference because I'd lose the velocity gained from the cashflow immediately generated.

    Having said that, I understand the what I lose MOST is the capital gain potential that I give up. This is the risk/reward for the developer. He carries the cost of present funding. he reaps the reward of future capital gain.

    If it pays to sell, why not?
    Good luck,
    KY

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