Self Build Plot - Negotiation
Discussion
The secret to this is knowledge. You need to try and research other land prices in the area to give you comparisons. A land value for residential development is usually calculated on a Residual Land Value Basis.
This the way a developer looks at it (and the way a surveyor should value it is as follows)
Find out the value of the final property that will be built on the land
deduct build costs
deduct fees eg planning, surveyors, lawyers
if selling on deduct marketing costs
deduct contingency (only idiots don't have a contingency)
deduct profit (especioally if you plan to sell on)#
The final figure is your gross land value from which you then deduct stamp duty land tax.
There is a catch to the science though single plots are most often bought by amateurs who cock up the costings and end up paying to much. This artificially and incorrectly skews the prices. Im my experience of land buying (circa £250 million in land values over the last ten years) single plots arer the hardest to buy safely. A much better bet is to find a plot that will take 2 or 3 houses, build them all and sell two, or even build one and sell the others as single plots.
If you are an amateur, estimating cost is very difficult. Things like tress that you think are some way off may affect foundation design, as can soil types, previous use etc. 30% of the cost will be in the ground and you can't even see it!
If you are going to negotiate, i would start lower than their "offers in excess of" figure unless you know that lots of people are looking at it. You can always increase an offer, it is very hard to reduce one.
if it goes to some sort of sealed bid auction then you have to decide what its worth to you (see above)
If its a dutch auction, walk away or make a fixed and final offer with an expiry deadline or you will end up paying to much.
Its best to make sure that any offer you make is in writing (by law the agent has to report it to the seller unless he has been instructed otherwise).
Good luck
Nick
If you are Cotswold based (i think you may be), pm me the agent and I may be able to tell yopu how he will handle it (if I know him). But I cant rread PM's until tomorrow afternoon
This the way a developer looks at it (and the way a surveyor should value it is as follows)
Find out the value of the final property that will be built on the land
deduct build costs
deduct fees eg planning, surveyors, lawyers
if selling on deduct marketing costs
deduct contingency (only idiots don't have a contingency)
deduct profit (especioally if you plan to sell on)#
The final figure is your gross land value from which you then deduct stamp duty land tax.
There is a catch to the science though single plots are most often bought by amateurs who cock up the costings and end up paying to much. This artificially and incorrectly skews the prices. Im my experience of land buying (circa £250 million in land values over the last ten years) single plots arer the hardest to buy safely. A much better bet is to find a plot that will take 2 or 3 houses, build them all and sell two, or even build one and sell the others as single plots.
If you are an amateur, estimating cost is very difficult. Things like tress that you think are some way off may affect foundation design, as can soil types, previous use etc. 30% of the cost will be in the ground and you can't even see it!
If you are going to negotiate, i would start lower than their "offers in excess of" figure unless you know that lots of people are looking at it. You can always increase an offer, it is very hard to reduce one.
if it goes to some sort of sealed bid auction then you have to decide what its worth to you (see above)
If its a dutch auction, walk away or make a fixed and final offer with an expiry deadline or you will end up paying to much.
Its best to make sure that any offer you make is in writing (by law the agent has to report it to the seller unless he has been instructed otherwise).
Good luck
Nick
If you are Cotswold based (i think you may be), pm me the agent and I may be able to tell yopu how he will handle it (if I know him). But I cant rread PM's until tomorrow afternoon
Edited by blueg33 on Monday 25th October 13:19
Thanks for the detailed reply Nick.
I'm not far from the Cotswolds but the plot is actually in the North Midlands. I've chatted to the agent who tells me he thinks the plot is worth xx all day long, but the market may dictate a slightly higher price. By the sounds of it there are a couple of people interested (could be BS of course)
It's a big plot which currently forms the garden, but local planning will only allow 1 house there. This sort of skews the cost for me as it could take a very big property, but in reality I wouldn't be prepared to do that as it would be far too big for my needs.
There are no living trees of any significant size on the plot although there are a couple of stumps that have been felled many years ago.
I'm not far from the Cotswolds but the plot is actually in the North Midlands. I've chatted to the agent who tells me he thinks the plot is worth xx all day long, but the market may dictate a slightly higher price. By the sounds of it there are a couple of people interested (could be BS of course)
It's a big plot which currently forms the garden, but local planning will only allow 1 house there. This sort of skews the cost for me as it could take a very big property, but in reality I wouldn't be prepared to do that as it would be far too big for my needs.
There are no living trees of any significant size on the plot although there are a couple of stumps that have been felled many years ago.
worsy said:
Thanks for the detailed reply Nick.
I'm not far from the Cotswolds but the plot is actually in the North Midlands. I've chatted to the agent who tells me he thinks the plot is worth xx all day long, but the market may dictate a slightly higher price. By the sounds of it there are a couple of people interested (could be BS of course)
It's a big plot which currently forms the garden, but local planning will only allow 1 house there. This sort of skews the cost for me as it could take a very big property, but in reality I wouldn't be prepared to do that as it would be far too big for my needs.
There are no living trees of any significant size on the plot although there are a couple of stumps that have been felled many years ago.
Does the plot have planning already? There is an increasing move away from allowing that. North Midlands has a number of places where large properties on large plots are the norm, its fair to say that you maximise the land value by ascertaining the maximum possible price for a house in that location and building the smallest possible house that will achieve that price. Advice from a good agent is key, and its the thing all professional developers will look for.I'm not far from the Cotswolds but the plot is actually in the North Midlands. I've chatted to the agent who tells me he thinks the plot is worth xx all day long, but the market may dictate a slightly higher price. By the sounds of it there are a couple of people interested (could be BS of course)
It's a big plot which currently forms the garden, but local planning will only allow 1 house there. This sort of skews the cost for me as it could take a very big property, but in reality I wouldn't be prepared to do that as it would be far too big for my needs.
There are no living trees of any significant size on the plot although there are a couple of stumps that have been felled many years ago.
If its a big plot in an upmarket area you need the right agent, ie one that really understands upmarket houses.
Why does the planning only allow one house? There could be a real angle there. Some locations have legal limitations to density but most areas like you to get reasonable density on a site. i guess more than one could affect the character of the area, but a chat to a planning consultant could help on that.
I am trying not to get carried away. I love all this stuff, its why I do what I do! The best land deal always has an angle and an upside
Still sounds interesting, it would need an analysis of the Appeal, I hate the "character of the area" thing, its normally bulls
t to pander to the nimby's. All areas evolve over time, too many people want to create museums!
The others looking to buy it could e brinkmanship by the agent so I would start low. Bear in mind that development finance is fairly tricky to get at the moment so there may be less competition than normal. Sounds worth going for, as long as you don't pay too much (I said that already)
If you havent done it before it can be very exciting, it can also be stressful, time consuming and expensive - see any episode of Grand Designs!
t to pander to the nimby's. All areas evolve over time, too many people want to create museums! The others looking to buy it could e brinkmanship by the agent so I would start low. Bear in mind that development finance is fairly tricky to get at the moment so there may be less competition than normal. Sounds worth going for, as long as you don't pay too much (I said that already)
If you havent done it before it can be very exciting, it can also be stressful, time consuming and expensive - see any episode of Grand Designs!
Back in front of a PC so have the chance to orate a better reply.
The planning refusal was based on keeping the character of the area. I have read all the planning objections and in the main they are positive if only one dwelling allowed. Allegedly the vendor asked for 4 a couple of years back, went to appeal and lost. I suspect the local residents accepted one as the best compromise.
A friend of mine's siser works on the planning dept there so once I'm further down the line I can get an inside view....hopefully.
Finance is tricky at the moment, no traditional mortgage lender will lend on a commercial basis (build to sell) and I'm aware of one developer who will need to sell his current project to fund this. Not easy at this time of year!
The planning refusal was based on keeping the character of the area. I have read all the planning objections and in the main they are positive if only one dwelling allowed. Allegedly the vendor asked for 4 a couple of years back, went to appeal and lost. I suspect the local residents accepted one as the best compromise.
A friend of mine's siser works on the planning dept there so once I'm further down the line I can get an inside view....hopefully.
Finance is tricky at the moment, no traditional mortgage lender will lend on a commercial basis (build to sell) and I'm aware of one developer who will need to sell his current project to fund this. Not easy at this time of year!
I've got a couple of thoughts on this.
The first concerns the actual failed planning permission. The council's website should have all the details of all applications (and the appeal decision notice/report) regarding this backland development/plot. If it doesn't they will have copies at the main Library/council offices.
I think you should definitely have a read of that failed appeal. They can't dismiss an appeal on NIMBYism. You never know - the planners might have accepted 3 rather 4 houses and the applicant simply tried to push the planners too far. Until you read the appeal report we won't know.
Have a chat with the case officer (again - it'll be on the original application - not the appeal) and get his take on things. If he/she is still there. If they aren't make an appointment to see the head of planning (usually if something goes to appeal he'll be aware of it as the council will have had to defend their decision and thus costs would have been involved). Get their take on things.
It might have come down to the attitude of the original applicant led them down a confrontational application; there could be angle to re-submit an application, taking on board some/all comments made and gain a planning permission for a 4 house site. Then again the council could be horrid and you'll have to resort to hitting them with an application that adheres to policy and go to appeal again.
But if you decide to just buy the plot and build your single home then my advice would be to print off a set of drawings (including elevations, internal layouts, exterior designs etc) and go and meet the local estate agents. Ignore the selling agents comments (no matter how genuine/nice he appears to be - he's acting in his client's best interests - the chap that's paying him - so he'll always talk the deal up, the house value(s) up, the interest in the plot/bidders etc etc).
As I say; make appointements with the estate agents (might want to ask them if they've got a land and new homes department too and meet them aswell) and sit down with them and ask them about what they think your house (or houses) will be worth. Get them to show you some comparable houses in the same road or equivalent area if they don't have direct evidence. Compare them to yours (ask yourself if your house has a bigger garden, better layout subjectively, dof the comparable houses have as nice a layout upstairs, en-suites, walk-in wardrobes, open plan kitchen/diners/day rooms, separate garages or integral etc etc). in this way you can get a much more accurate picture of the residual land value and thus your offer and you'll also be able to assess how fair and true the selling agent has been.
Whilst your doing this also ask them about what they've heard about your plot; have they had other people in asking about the plot etc etc Estate agents love a gossip - they also know the market too (depending on whom you're dealing with - try to deal with someone whom has been in the local market for a long time at each agent); they might have a different attitude to the site compared to the selling agent and once you've got all this info you can sift through the bullst and come up with your own conclusions.
Meeting the land and new homes people (take the 4 house scheme with you and tell them you're thinking about developing) as they'll have a slightly different take, potentially, on the site compared to their local office. They also might know more about the site's history too.
I'd also approach a local planning consultant and have a chat with them - first consultation is free. They might know the site too, some of the background and might help you see an angle that others have missed.
In terms of your offer. If you're prepared to tell us where (roughly) the plot is, what the selling agent has the land on the market for and what you think the house will be worth once built I'd be happy to give you an idea of what sort of level I'd be going in at (all things be equal).
One of the things I do is also put my solicitor in funds and ask him to call the selling agent to tell him. It just adds a certain amount of gravitas/intent to your offer but I always go in low. As someone else here has said = you can always raise your offer but chipping your orginal offer always leaves a bad taste in the mouth.
Cash is king. You have it, they haven't. There are other plots out there (even if you've set your heart on this one for god's sake don't tell him!), the market for finance is extremely difficult (make a point of telling them that you don't need finance if you don't need finance, keep schtum if you do!!), make a point of telling him that they've failed on appeal already, in fact, do everything you can to give the impression that you are their saviour! Write your offer in including your solicitor's details (put Subject to Contract at the top of the letter).
If you want help with the letters or anything really - I'm happy to pass you something I've got and I'm sure others will too.
Good luck chap!
The first concerns the actual failed planning permission. The council's website should have all the details of all applications (and the appeal decision notice/report) regarding this backland development/plot. If it doesn't they will have copies at the main Library/council offices.
I think you should definitely have a read of that failed appeal. They can't dismiss an appeal on NIMBYism. You never know - the planners might have accepted 3 rather 4 houses and the applicant simply tried to push the planners too far. Until you read the appeal report we won't know.
Have a chat with the case officer (again - it'll be on the original application - not the appeal) and get his take on things. If he/she is still there. If they aren't make an appointment to see the head of planning (usually if something goes to appeal he'll be aware of it as the council will have had to defend their decision and thus costs would have been involved). Get their take on things.
It might have come down to the attitude of the original applicant led them down a confrontational application; there could be angle to re-submit an application, taking on board some/all comments made and gain a planning permission for a 4 house site. Then again the council could be horrid and you'll have to resort to hitting them with an application that adheres to policy and go to appeal again.
But if you decide to just buy the plot and build your single home then my advice would be to print off a set of drawings (including elevations, internal layouts, exterior designs etc) and go and meet the local estate agents. Ignore the selling agents comments (no matter how genuine/nice he appears to be - he's acting in his client's best interests - the chap that's paying him - so he'll always talk the deal up, the house value(s) up, the interest in the plot/bidders etc etc).
As I say; make appointements with the estate agents (might want to ask them if they've got a land and new homes department too and meet them aswell) and sit down with them and ask them about what they think your house (or houses) will be worth. Get them to show you some comparable houses in the same road or equivalent area if they don't have direct evidence. Compare them to yours (ask yourself if your house has a bigger garden, better layout subjectively, dof the comparable houses have as nice a layout upstairs, en-suites, walk-in wardrobes, open plan kitchen/diners/day rooms, separate garages or integral etc etc). in this way you can get a much more accurate picture of the residual land value and thus your offer and you'll also be able to assess how fair and true the selling agent has been.
Whilst your doing this also ask them about what they've heard about your plot; have they had other people in asking about the plot etc etc Estate agents love a gossip - they also know the market too (depending on whom you're dealing with - try to deal with someone whom has been in the local market for a long time at each agent); they might have a different attitude to the site compared to the selling agent and once you've got all this info you can sift through the bulls
t and come up with your own conclusions.Meeting the land and new homes people (take the 4 house scheme with you and tell them you're thinking about developing) as they'll have a slightly different take, potentially, on the site compared to their local office. They also might know more about the site's history too.
I'd also approach a local planning consultant and have a chat with them - first consultation is free. They might know the site too, some of the background and might help you see an angle that others have missed.
In terms of your offer. If you're prepared to tell us where (roughly) the plot is, what the selling agent has the land on the market for and what you think the house will be worth once built I'd be happy to give you an idea of what sort of level I'd be going in at (all things be equal).
One of the things I do is also put my solicitor in funds and ask him to call the selling agent to tell him. It just adds a certain amount of gravitas/intent to your offer but I always go in low. As someone else here has said = you can always raise your offer but chipping your orginal offer always leaves a bad taste in the mouth.
Cash is king. You have it, they haven't. There are other plots out there (even if you've set your heart on this one for god's sake don't tell him!), the market for finance is extremely difficult (make a point of telling them that you don't need finance if you don't need finance, keep schtum if you do!!), make a point of telling him that they've failed on appeal already, in fact, do everything you can to give the impression that you are their saviour! Write your offer in including your solicitor's details (put Subject to Contract at the top of the letter).
If you want help with the letters or anything really - I'm happy to pass you something I've got and I'm sure others will too.
Good luck chap!
worsy said:
Back in front of a PC so have the chance to orate a better reply.
The planning refusal was based on keeping the character of the area. I have read all the planning objections and in the main they are positive if only one dwelling allowed. Allegedly the vendor asked for 4 a couple of years back, went to appeal and lost. I suspect the local residents accepted one as the best compromise.
A friend of mine's siser works on the planning dept there so once I'm further down the line I can get an inside view....hopefully.
Finance is tricky at the moment, no traditional mortgage lender will lend on a commercial basis (build to sell) and I'm aware of one developer who will need to sell his current project to fund this. Not easy at this time of year!
Worsy - is this plot in a conservation area? Is it designated an area of low density in the local plan? The local residents only count for so much - it's the planning commitee's views and the planning officers that really count - that should be noted on the website. Definitely worth a chat.The planning refusal was based on keeping the character of the area. I have read all the planning objections and in the main they are positive if only one dwelling allowed. Allegedly the vendor asked for 4 a couple of years back, went to appeal and lost. I suspect the local residents accepted one as the best compromise.
A friend of mine's siser works on the planning dept there so once I'm further down the line I can get an inside view....hopefully.
Finance is tricky at the moment, no traditional mortgage lender will lend on a commercial basis (build to sell) and I'm aware of one developer who will need to sell his current project to fund this. Not easy at this time of year!
Edited by Oi_Oi_Savaloy on Tuesday 26th October 09:18
^^^^
Good comments, research is important.
I would also be happy to value the plot for yu. My development patch covered the Midlands for many years so I have a resonable feel. (I now work nationally so am not quite so focussed)
I tend to fund my own small developments by extending the mortgage on my house or getting a mortage on another one I have built rather than tryingto find development finance.
Even the big jobs I do for work can't get development finance, I have to go for cashflow funding and LTV is still only around 60%.
The banks lost a lot of money through poor lending to developers
Good comments, research is important.
I would also be happy to value the plot for yu. My development patch covered the Midlands for many years so I have a resonable feel. (I now work nationally so am not quite so focussed)
I tend to fund my own small developments by extending the mortgage on my house or getting a mortage on another one I have built rather than tryingto find development finance.
Even the big jobs I do for work can't get development finance, I have to go for cashflow funding and LTV is still only around 60%.
The banks lost a lot of money through poor lending to developers
Thanks all.
It's not a conservation area. I suspect the refusal was based on access/traffic.
The issue here is that the land has OPP only, I'd not have plans until I engaged with an architect. I'd certainly not want to put 4 there, but my own plus selling part of the plot to another self builder to fund would be desirable.
It's not a conservation area. I suspect the refusal was based on access/traffic.
The issue here is that the land has OPP only, I'd not have plans until I engaged with an architect. I'd certainly not want to put 4 there, but my own plus selling part of the plot to another self builder to fund would be desirable.
blueg33 said:
^^^^
Good comments, research is important.
I would also be happy to value the plot for yu. My development patch covered the Midlands for many years so I have a resonable feel. (I now work nationally so am not quite so focussed)
I tend to fund my own small developments by extending the mortgage on my house or getting a mortage on another one I have built rather than tryingto find development finance.
Even the big jobs I do for work can't get development finance, I have to go for cashflow funding and LTV is still only around 60%.
The banks lost a lot of money through poor lending to developers
Exactly - the firm I've just stated working for (in my 7th week) are in this position. £50 million in equity from Graphite Capital with various banks match funding up to various different LTV ratio's depending on the deal, area, size and mix of units. Good comments, research is important.
I would also be happy to value the plot for yu. My development patch covered the Midlands for many years so I have a resonable feel. (I now work nationally so am not quite so focussed)
I tend to fund my own small developments by extending the mortgage on my house or getting a mortage on another one I have built rather than tryingto find development finance.
Even the big jobs I do for work can't get development finance, I have to go for cashflow funding and LTV is still only around 60%.
The banks lost a lot of money through poor lending to developers
There are some chaps here whom are putting their money on the line for development whom have a vested interest in the sites they buy (I'm just a salaried land buyer - I get paid to spend the company's money! That's not to say I take a flippant view of buying sites because 'it's not my money' just that if you are investing your own risk/money you have different view on things). I actually love land, looking at things from a different perspective, really working the site to extract maximum value and take my job very seriously but I've no vested interest in the sites I buy as I've not been allowed to buy into the company I work for yet.....
Worsy - you need to stress your ability to do the deal chap - bearing in mind that he doesn't know you from Adam. Hence putting your solicitor in funds or perhaps providing proof of funds when you submit your offer. Cash is absolutely king and we are still in a recession. If I had land now; I would not be selling in this market unless I absolutely had to. Therefore play hard ball. You have the money; they don't. Forget what the agent is saying - the other bidders might be time wasters/need finance. do the deal on your terms or tell the agent to f
k off, land register the site and send your offer direct to the registered ownedYep - selling the other half to help pay for the actual build of the house would be helpful. Is this your final resting place (as it were)? Does it have to be your home or could you not sell the plots off (2 or 3) and then use that money to buy an even better site in 2 or 3 years time?
Even outline plans (depending on when they were done) have to have a design and access statement - it's almost pointless doing an outline application these days. But all of these plans will be on line. There will be at least an indicative outline of the house(s) on line - take that to the agents.
If you don't have anything then I suggest you get on bingmaps or google maps; print of a location map and get someone to do a promap of the site (I've got a personal account) - take that to agents and say to them - what would you put on that site. Meet as many agents as you can and then form your own conclusions - you never know what you'll come up with.
Even outline plans (depending on when they were done) have to have a design and access statement - it's almost pointless doing an outline application these days. But all of these plans will be on line. There will be at least an indicative outline of the house(s) on line - take that to the agents.
If you don't have anything then I suggest you get on bingmaps or google maps; print of a location map and get someone to do a promap of the site (I've got a personal account) - take that to agents and say to them - what would you put on that site. Meet as many agents as you can and then form your own conclusions - you never know what you'll come up with.
Oi_Oi_Savaloy said:
blueg33 said:
^^^^
Good comments, research is important.
I would also be happy to value the plot for yu. My development patch covered the Midlands for many years so I have a resonable feel. (I now work nationally so am not quite so focussed)
I tend to fund my own small developments by extending the mortgage on my house or getting a mortage on another one I have built rather than tryingto find development finance.
Even the big jobs I do for work can't get development finance, I have to go for cashflow funding and LTV is still only around 60%.
The banks lost a lot of money through poor lending to developers
Exactly - the firm I've just stated working for (in my 7th week) are in this position. £50 million in equity from Graphite Capital with various banks match funding up to various different LTV ratio's depending on the deal, area, size and mix of units. Good comments, research is important.
I would also be happy to value the plot for yu. My development patch covered the Midlands for many years so I have a resonable feel. (I now work nationally so am not quite so focussed)
I tend to fund my own small developments by extending the mortgage on my house or getting a mortage on another one I have built rather than tryingto find development finance.
Even the big jobs I do for work can't get development finance, I have to go for cashflow funding and LTV is still only around 60%.
The banks lost a lot of money through poor lending to developers
There are some chaps here whom are putting their money on the line for development whom have a vested interest in the sites they buy (I'm just a salaried land buyer - I get paid to spend the company's money! That's not to say I take a flippant view of buying sites because 'it's not my money' just that if you are investing your own risk/money you have different view on things). I actually love land, looking at things from a different perspective, really working the site to extract maximum value and take my job very seriously but I've no vested interest in the sites I buy as I've not been allowed to buy into the company I work for yet.....
Worsy - you need to stress your ability to do the deal chap - bearing in mind that he doesn't know you from Adam. Hence putting your solicitor in funds or perhaps providing proof of funds when you submit your offer. Cash is absolutely king and we are still in a recession. If I had land now; I would not be selling in this market unless I absolutely had to. Therefore play hard ball. You have the money; they don't. Forget what the agent is saying - the other bidders might be time wasters/need finance. do the deal on your terms or tell the agent to f
k off, land register the site and send your offer direct to the registered ownedThe key thing is to make sure you can deliver on what you say, ie do the deal, tbh if the land has reached the open market then the chances are that there are not many real buyers out there at the moment. Most land deals are done before the site is widely exposed to the market.
Saveloys advice on market research is sound (he detailed what I was trying to say), the same on planning. Research the appeal online, all you need is the property address.
OT but a question for Saveloy, are you a resi land buyer? what area are you in? I have to of load a large resi site in Yorkshire shortly and a smaller one in Essex. Do your guys have any money?
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