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Selling land to development company

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  • Selling land to development company

    Hi

    I live in a big house converted into 5 individual flats. I have recently been approached by others in the house who've been in contact with someone working in the industry, who's indicated that there is potential for us to sell the building as a whole. One option would apparently be demolishing and for the purchasing company to put up new flats on the land.

    We've been told we could potentially get the market value of our flat, plus, 30, 35, or 40%. Firstly, does anyone know anything about this type of deal and what kinds of things we should think about?

    More specifically, we have been told that what happens is that individuals get their flats valued, then say what percentage increase they would be happy with. These are then added up to make an overall value for the property, so each flat gets a percentage of this based on their valuations.

    My question is then, what is to stop people giving an over inflated valuation for their flats, thereby getting an unfair overall percentage?

  • #2
    Hi
    I guess there are at least 2 parts to the answer. Firstly, you would be best to employ a single valuer to provide an evaluation of the property as is - someone RICS (which would be recognised by banks/developers) and not an Estate Agent - it costs you but given the return likely would be worthwhile.
    Crucially you only all gain if you can all agree the value together.

    Secondly the value of the property is what a developer is prepared to pay - could be with or without planning permission....likely you'll get more if you allow the developer to work thru the planning without paying you for the site (less risk for them/more gain for you). Generally a site is worth between 35-45% of the end value of the development (can vary depending on content of scheme).

    Hope this helps
    Mark
    Mark Donald
    www.Reports4Planning.co.uk
    providing more effective reports.......

    Comment


    • #3
      Hi
      I guess there are at least 2 parts to the answer. Firstly, you would be best to employ a single valuer to provide an evaluation of the property as is - someone RICS (which would be recognised by banks/developers) and not an Estate Agent - it costs you but given the return likely would be worthwhile.
      Crucially you only all gain if you can all agree the value together.

      Secondly the value of the property is what a developer is prepared to pay - could be with or without planning permission....likely you'll get more if you allow the developer to work thru the planning without paying you for the site (less risk for them/more gain for you). Generally a site is worth between 35-45% of the end value of the development (can vary depending on content of scheme).

      Hope this helps
      Mark
      Mark Donald
      www.Reports4Planning.co.uk
      providing more effective reports.......

      Comment


      • #4
        Hi Mark

        Thanks for that, it's very helpful.

        Do you recommend getting a valuer to give us an overall value on the property before going to developers then? - would such a person be able to provide us with individual valuations of the flats so that we would know what proportion of the overall amount we should each receive? I think what we had previously been advised was that we should individually get our flats valued and subsequently tell everyone else what final amount we would be happy with. - the overall value would then be determined by the individual values of the flats, plus the percentage of profit that we were individually happy with.

        We were then advised that what would happen then was the development company would value the property and offer us an amount. Whether or not we accepted this was to be based on what we had individually decided we'd be happy to receive.

        The individual valuations were to make up a proportion of the overall amount, so that whatever amount we were offered by the property company we would each receive a proportion of this based on our individual valuations. Does that seem like a sensible thing to do, or if not how would we be able to work out our individual shares/proportions of the overall value?

        Once again, thanks for the advice,

        Mark

        Comment


        • #5
          Hi Mark
          I think it's likely to be more easily sorted if all agree to a single valuer. If not then it's likely that some Estate agents values will vary, thus if you all use the same one it should provide a level playing field. You can then fairly divide up the Developer's offer between you.
          As far as the value is concerned, it's really irrelevant as to individual values - the developer will offer an overall value (% of the Development's value).
          One problem will be if any of you individually decide to hang out for more, thus stopping the whole transaction.
          Hope it all goes well for you
          Mark
          Mark Donald
          www.Reports4Planning.co.uk
          providing more effective reports.......

          Comment


          • #6
            Hi Mark,

            Thanks once again for your advice.

            I definitely agree that getting an overall valuer would be the fairest thing. I assume an estate agent would not do this, as they would realise that we wouldn't be selling the flats individually so there'd be no business for them. Do you know who we might get to do it then and how much it could cost?

            I realise that individual value of the flats are irrelevant to developers, but it's clear highly important in assigning proportions of the overall amount and therefore how much we would ultimately each receive. This I suppose makes it a highly important factor to do as fairly as possible.

            I think if anyone hangs out for more it would be us, as we only recently moved in and are probably the least keen on this idea. If that happens I hope it doesn't casue any problems with ours neighbours!

            Many thanks,

            Mark

            Comment


            • #7
              We'd use a RICS valuer - eg King Sturge, Atis Real etc and yeh they do charge....I reckon between you all at least a couple of thousand. You could get an Estage Agent to help out, but suggest if you do then the same one should do all the valuations and perhaps pay their costs if necessary so you get a properly considered view.
              Agree it's imperative to get these values right.
              It appears the deal would be worth talking further about - if you could net a 30% gain (tax free if it's your principal home) then thats something worth the inconvenience, given you'll buy another place easily in the market as it is, and perhaps get a great deal too.
              Just a word of caution before spending money on your side - get some offer from the developer and understand if it's subject to planning etc. It may be that they need planning to offer the higher values but this could take 4-12months, or more if it's contriversial.
              Cheers
              Mark
              Mark Donald
              www.Reports4Planning.co.uk
              providing more effective reports.......

              Comment


              • #8
                Cheers Mark,

                We're supposed to be meeting again soon to discuss this, so hopefully we can get some kind of ideas about valuations.

                If it's ok, I might let you know if there's any developments (such as valuations or offers) as you certainly seem to know what you're talking about and your advice has been very helpful!

                Thanks very much,

                Mark

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