Are banks into building houses?
Discussion
My wife and I have found a small development of three properties. The original house has been fully renovated and further down the lane there are two new 5 bed houses.
None of them have sold and though they are very nice and in a very desirable area the estate agent believes that really there should of been just one new build house built on the plot instead of the two.
They've already dropped the prices by £50000 from the heady heights of £650000 but the agent admitted they should be really about £500000 to move in this market.
I'm planning to make an offer today on the original house but I remember the estate agent saying that the original house was repossessed by the bank and he informed me that the bank then decided to get planning permission and build the two new houses down the lane?
Before I go charging in , my gut feeling is that as the new builds are still not finished ( no kitchens or bathrooms installed )and there are signs that final stages of the development have seen cost cutting ( the drive has just gravel thrown over the top instead of a proper tarmac drive)my feelings are that the developer has gone belly up and so my position might be a lot stronger as im in no chain.
So do banks really go into the house building market?
None of them have sold and though they are very nice and in a very desirable area the estate agent believes that really there should of been just one new build house built on the plot instead of the two.
They've already dropped the prices by £50000 from the heady heights of £650000 but the agent admitted they should be really about £500000 to move in this market.
I'm planning to make an offer today on the original house but I remember the estate agent saying that the original house was repossessed by the bank and he informed me that the bank then decided to get planning permission and build the two new houses down the lane?
Before I go charging in , my gut feeling is that as the new builds are still not finished ( no kitchens or bathrooms installed )and there are signs that final stages of the development have seen cost cutting ( the drive has just gravel thrown over the top instead of a proper tarmac drive)my feelings are that the developer has gone belly up and so my position might be a lot stronger as im in no chain.
So do banks really go into the house building market?
Edited by Chipper on Monday 7th November 08:14
Edited by Chipper on Monday 7th November 08:15
Chipper said:
My wife and I have found a small development of three properties. The original house has been fully renovated and further down the lane there are two new 5 bed houses.
None of them have sold and though they are very nice and in a very desirable area the estate agent believes that really there should of been just one new build house built on the plot instead of the two.
They've already dropped the prices by £50000 from the heady heights of £650000 but the agent admitted they should be really about £500000 to move in this market.
I'm planning to make an offer today on the original house but I remember the estate agent saying that the original house was repossessed by the bank and he informed me that the bank then decided to get planning permission and build the two new houses down the lane?
Before I go charging in , my gut feeling is that as the new builds are still not finished ( no kitchens or bathrooms installed )and there are signs that final stages of the development have seen cost cutting ( the drive has just gravel thrown over the top instead of a proper tarmac drive)my feelings are that the developer has gone belly up and so my position might be a lot stronger as im in no chain.
So do banks really go into the house building market?
Many banks are into house building. RBS was the biggest house builder in the UK until 2008. Many developers were so highly geared that it was really the banks doing the developments.None of them have sold and though they are very nice and in a very desirable area the estate agent believes that really there should of been just one new build house built on the plot instead of the two.
They've already dropped the prices by £50000 from the heady heights of £650000 but the agent admitted they should be really about £500000 to move in this market.
I'm planning to make an offer today on the original house but I remember the estate agent saying that the original house was repossessed by the bank and he informed me that the bank then decided to get planning permission and build the two new houses down the lane?
Before I go charging in , my gut feeling is that as the new builds are still not finished ( no kitchens or bathrooms installed )and there are signs that final stages of the development have seen cost cutting ( the drive has just gravel thrown over the top instead of a proper tarmac drive)my feelings are that the developer has gone belly up and so my position might be a lot stronger as im in no chain.
So do banks really go into the house building market?
Edited by Chipper on Monday 7th November 08:14
Edited by Chipper on Monday 7th November 08:15
In the case you are talking about, the bank's advisers have clearly seen an angle where the bank can add value to the repossessed asset. But normally they would sell the site with planning rather than develop it themselves.
Unless you are a builder, it is a big risk taking on someone else's part finished job, you have no idea what has been done badly.
Back in 2005 we took on 2 developments from a builder gone bust, one for 30 apartments the other for 55 apartments. The 55 apartment schemes had the drains filled with concrete because the bust developer hadn't paid the subbies, and the structural work had been short cut with only 50% of the steel it was supposed to have. We made money on the 30 units scheme but lost £800k on the other and we paid £0 for the part finished site
blueg33 said:
Many banks are into house building. RBS was the biggest house builder in the UK until 2008. Many developers were so highly geared that it was really the banks doing the developments.
In the case you are talking about, the bank's advisers have clearly seen an angle where the bank can add value to the repossessed asset. But normally they would sell the site with planning rather than develop it themselves.
Unless you are a builder, it is a big risk taking on someone else's part finished job, you have no idea what has been done badly.
Back in 2005 we took on 2 developments from a builder gone bust, one for 30 apartments the other for 55 apartments. The 55 apartment schemes had the drains filled with concrete because the bust developer hadn't paid the subbies, and the structural work had been short cut with only 50% of the steel it was supposed to have. We made money on the 30 units scheme but lost £800k on the other and we paid £0 for the part finished site
The original house has been finished but the estate agent seems rather frustrated with the development as they have not finished the other two new builds. They have though said that they will finish them to my spec but it knocks my buying position. In the case you are talking about, the bank's advisers have clearly seen an angle where the bank can add value to the repossessed asset. But normally they would sell the site with planning rather than develop it themselves.
Unless you are a builder, it is a big risk taking on someone else's part finished job, you have no idea what has been done badly.
Back in 2005 we took on 2 developments from a builder gone bust, one for 30 apartments the other for 55 apartments. The 55 apartment schemes had the drains filled with concrete because the bust developer hadn't paid the subbies, and the structural work had been short cut with only 50% of the steel it was supposed to have. We made money on the 30 units scheme but lost £800k on the other and we paid £0 for the part finished site
Chipper said:
The original house has been finished but the estate agent seems rather frustrated with the development as they have not finished the other two new builds. They have though said that they will finish them to my spec but it knocks my buying position.
It depends who is really building them. Bank finance for development is very hard to get. I needed £30m in the summer and work for a £2bn turnover company. We were rejected by 5 banks and one would only lend after we deposited £80m with them for another project. Our gearing is under 30%.For smaller developers it is very much harder, most of the funding comes from Private Equity which costs circa 20%.
What I am getting at, is that unless you can be certain that whoever is building the houses is funded, then they may not get finished in the near future.
It won't be the bank that will be building ( if indeed anyone is) it will be the administrators.
I've had cases where there was a better outcome for the bank for the administrators to take over the development of the site. This was normally where the developer was inexperienced/dopey/ crooked. All above checks re quality of development to date stand.
Try to find out who the administrators and see if you can get any sense off them. You will need to bear in mind that they are appointed to get the best return for the creditors though......
I've had cases where there was a better outcome for the bank for the administrators to take over the development of the site. This was normally where the developer was inexperienced/dopey/ crooked. All above checks re quality of development to date stand.
Try to find out who the administrators and see if you can get any sense off them. You will need to bear in mind that they are appointed to get the best return for the creditors though......
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