Offering my house to a developer - what should I ask?
Discussion
Long story short:
Building next door was purchased by local council (large care home)
Council proposed turning building in to a homeless shelter
We fought it and council had to withdraw plans (we believe the head architect lost his job over this).
Council is now stuck with a property that they can't do much with so have decided to demolish it.
We overheard council boffs and the demolition guy discussing the demolition and 'they don't know what's happening once demolished'
From our understanding, the building is a bit of a dud for the council.
Family wants to move anyway, so we have invited a local developer who seems interested in the potential (our plot is 0.2 acres + 0.4 acres for the plot next door).
What questions should I be asking the developer? If they build 8 townhouses on the combined plot, we think they could make approx. £800k-£1m (could be wildly wrong, though).
TIA
Building next door was purchased by local council (large care home)
Council proposed turning building in to a homeless shelter
We fought it and council had to withdraw plans (we believe the head architect lost his job over this).
Council is now stuck with a property that they can't do much with so have decided to demolish it.
We overheard council boffs and the demolition guy discussing the demolition and 'they don't know what's happening once demolished'
From our understanding, the building is a bit of a dud for the council.
Family wants to move anyway, so we have invited a local developer who seems interested in the potential (our plot is 0.2 acres + 0.4 acres for the plot next door).
What questions should I be asking the developer? If they build 8 townhouses on the combined plot, we think they could make approx. £800k-£1m (could be wildly wrong, though).
TIA
Tigerj said:
Fights planning permission, moves anyway.
Chefs kiss.
It's a very complicated situation - we thought this would be our forever home, but we feel that we are being forced to move by actions of the council and the uncivilised behaviour of our neighbours (we were warned by my previous neighbour that the people in this area were 'uneducated' - they were being generous).Chefs kiss.
If we could get away, it would be a massive double middle-finger to most people on this road which they deserve.
richhead said:
And gloats about guy loosing his job. Lovely
The plans put forward by the chief architect were in breach of planning law, hence why it was withdrawn - he was either incompetent or knowingly attempting to push through an illegal deveopment - he deserved to lose his job.newberry said:
Surely the only question you need to ask a developer is "how much will you give me"?
Why do you need to know anything else if you are moving and hate all your neighbors?
This is the correct answer, just negotiate. You won't be able to work out the site value to any meaningful degree as there are too many variables.Why do you need to know anything else if you are moving and hate all your neighbors?
With your figure of £800-1000k profit (but lets say £900k to make it easy...) the total land is 0.6acres and you have 1/3 of the total land.
Using the old (and admittedly outdated) rule of thumb of 1/3 land, 1/3 construction costs and 1/3 developer profit, that could place a land value of around £300,000 for your 0.2acre.
However, that is only a very crude starting point. 1/3 of the land does not necessarily represent 1/3 of the development value. Your parcel could be worth considerably more if it provides the access, frontage, layout space or additional development capacity needed to make the combined scheme work.
A developer will not really be interested in the existing value of your home if their intention is to demolish it. However, if they could retain it and use some of the surrounding land then it may facilitate development next door.
You also need to allow for matters such as CIL, Section 106 contributions, demolition, professional fees and abnormal development costs. I have just had a scheme effectively canned because the LPA wanted approximately £35,000 in CIL for converting a former care home into six flats, as the care home had not been in lawful use for the preceding three years...
Also had another site canned... £200/m2 for CIL, so over £100k payment on 5 x 3 bed houses, we aren't talking executive detached. It doesn't come off the (increasing) build costs and whilst the developer might drop their profit level the land value is the key...
First step is to meet the developer, ask what they believe can be built, establish their estimated GDV (gross development value), costs, profit allowance and residual land value, and go from there...
Using the old (and admittedly outdated) rule of thumb of 1/3 land, 1/3 construction costs and 1/3 developer profit, that could place a land value of around £300,000 for your 0.2acre.
However, that is only a very crude starting point. 1/3 of the land does not necessarily represent 1/3 of the development value. Your parcel could be worth considerably more if it provides the access, frontage, layout space or additional development capacity needed to make the combined scheme work.
A developer will not really be interested in the existing value of your home if their intention is to demolish it. However, if they could retain it and use some of the surrounding land then it may facilitate development next door.
You also need to allow for matters such as CIL, Section 106 contributions, demolition, professional fees and abnormal development costs. I have just had a scheme effectively canned because the LPA wanted approximately £35,000 in CIL for converting a former care home into six flats, as the care home had not been in lawful use for the preceding three years...
Also had another site canned... £200/m2 for CIL, so over £100k payment on 5 x 3 bed houses, we aren't talking executive detached. It doesn't come off the (increasing) build costs and whilst the developer might drop their profit level the land value is the key...
First step is to meet the developer, ask what they believe can be built, establish their estimated GDV (gross development value), costs, profit allowance and residual land value, and go from there...
Many thanks for the reply Andy
Your figures align with what I have in my head i.e. value of the plots individually.
I have spoken with the Asset Manager at the council previously and he was quite categorical that their plot was too small to really do anything with after the planning withdrawal. He did quip 'do you want to buy it from us?', we did officially ask, he said he'd get back to me, but never did so I am assuming that they may be willing to dispose of it.
The combined plot is 52m wide (street facing) and 49m deep - based on a 2019 development of 4x 4 bed townhouses (plot was 26m wide x 38m deep) nearby, we estimate that a developer could fit 8 similar houses street facing, but with larger gardens so 8x £450-500k houses = £3.6-£4m GDV.
Our house is valued at £725k and and the council paid £1.7m for next door (way too much, but this is the council). The council have probably paid £1m over the market value (building was large and delapidated) and are now effectively left with a plot. We are hoping that the council just want to dispose of it and cut their losses, but I may be clutching at straws.
My figures i.e. profit for developer may be wildly optimistic, but I will hopefully find out tomorrow.
Your figures align with what I have in my head i.e. value of the plots individually.
I have spoken with the Asset Manager at the council previously and he was quite categorical that their plot was too small to really do anything with after the planning withdrawal. He did quip 'do you want to buy it from us?', we did officially ask, he said he'd get back to me, but never did so I am assuming that they may be willing to dispose of it.
The combined plot is 52m wide (street facing) and 49m deep - based on a 2019 development of 4x 4 bed townhouses (plot was 26m wide x 38m deep) nearby, we estimate that a developer could fit 8 similar houses street facing, but with larger gardens so 8x £450-500k houses = £3.6-£4m GDV.
Our house is valued at £725k and and the council paid £1.7m for next door (way too much, but this is the council). The council have probably paid £1m over the market value (building was large and delapidated) and are now effectively left with a plot. We are hoping that the council just want to dispose of it and cut their losses, but I may be clutching at straws.
My figures i.e. profit for developer may be wildly optimistic, but I will hopefully find out tomorrow.
hidetheelephants said:
Option the council site, then you actually have something to sell to a developer other than an idea.
Option? Can you explain further?The developer knows both sites well - they were the selling agents for the previous owners of my house a few years ago, but way before next door came up for sale.
HolyMoly said:
hidetheelephants said:
Option the council site, then you actually have something to sell to a developer other than an idea.
Option? Can you explain further?The developer knows both sites well - they were the selling agents for the previous owners of my house a few years ago, but way before next door came up for sale.
Ignore the 33% 33% 33% approximation. It’s so inaccurate it’s pointless especially with a small site, or a site in a high value area, or a brownfield site etc.
You need a basic residual land value calculation
Work out sale price of finished development
Subtract from that
20% of the finished value as gross profit
Build costs
Planning and design costs
Marketing costs (around 4% of finished value)
Costs of servicing the site
S106 and CIL
Legal fees
What s left is the land value including SDLT
You need a basic residual land value calculation
Work out sale price of finished development
Subtract from that
20% of the finished value as gross profit
Build costs
Planning and design costs
Marketing costs (around 4% of finished value)
Costs of servicing the site
S106 and CIL
Legal fees
What s left is the land value including SDLT
Edited by blueg33 on Wednesday 5th August 02:52
Council will have to sell the site on the open market, they are obliged to by law unless the site is ransomed.
They may also just ask a local HA to develop the site for affordable housing, or develop it themselves for the same purpose.
If the plan was for a homeless shelter, the land may sit in the HRA and it’s hard to extract it from that for no on affordable uses.
They may also just ask a local HA to develop the site for affordable housing, or develop it themselves for the same purpose.
If the plan was for a homeless shelter, the land may sit in the HRA and it’s hard to extract it from that for no on affordable uses.
Jeremy-75qq8 said:
But I come back to why would the council demolish the building if they want to exit ? It is not a logical step.
You also need planning approval to demolish which would typically state why. So what did the permission say on the council planning website
This is a another bone of contention - the council initially just sent us a letter stating that they were going to demolish it - no planning apllication, nothing. Again, we took legal advice and wrote to the council questioning this - they then put in an application for demolition but gave no reason for the demolition and no indication as to what is going to replace it. - approval was subsequently granted.You also need planning approval to demolish which would typically state why. So what did the permission say on the council planning website
Edited by HolyMoly on Wednesday 5th August 08:21
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