Best Practices for Negotiation with Developers

onthefence on 24/04/2022 - 14:33

My parents live on a 600 sqm block a couple of minutes from a train station in the outer suburbs of Sydney.

Based on what is happening on other (very) nearby blocks, I imagine it is likely that they'll be getting offers from developers in the next few years.

They are getting on (mid-late 60s, empty nest etc.) so would probably be interested when an offer comes in.

If anyone has any best practices for maximising sale prices via negotiation in cases like this, I'll pass it on to them - it would be much appreciated.

General Discussion

Comments

  • orangetrain on 24/04/2022 - 14:36

    Be like Ross. Start a 'Friends' with neighbours.

  • AustriaBargain on 24/04/2022 - 14:42

    They should demolish their house and start an apple picking commune. If they plant the orchid now then the apples will be ready to pick in a few years.

    • bloom on 24/04/2022 - 15:18
      +7

      So when you reject a developer bid you can say “how do you like dem apples?”

      • Puglife on 24/04/2022 - 15:36
        +3

        Developer will respond with "well that was orchard"

        • Kangal on 24/04/2022 - 18:28
          +1

          Developers usually do have a tough time with Apple

        • Sum-Ting Wong on 24/04/2022 - 22:46

          Yeah and then you say “orange you glad I didn’t say banana”

  • Hithere on 24/04/2022 - 15:49
    +5

    Tell the buyer/developer "It's not a house, it's a home". Then ask 100% more than their best offer.

    • djkelly69 on 24/04/2022 - 17:44
      +2

      Respond with "tell'em he's dreamin" to said best offer

  • freefall101 on 24/04/2022 - 15:52
    +1

    Find out what nearby properties sold for (it's on most real estate websites). Since it's for development, you could easily just figure it out by square metre as a good idea.

    This is really what auctions are for though. Get it listed online, look at what developers have been buying up in the area and let them know, try gather as much interest as possible and see what people pay. Developers reaching out to you are doing so to try keep their price down by making it a quick and easy transaction. It all comes down to how much effort you're willing to put in to maximise the return.

  • sam-1966 on 24/04/2022 - 16:12
    +5

    I remember hearing about a group of neighbours in Sunnybank, Brisbane, discovering that developers were 'sniffing around'. So they got together to discuss, united as a group and ended up with a lot more money than they would have negotiating individually. Maybe speak to the neighbours.

    • netjock on 24/04/2022 - 16:31
      +1

      Outer suburbs I'd think developers are looking to put 3 - 4 (tiny) town houses on that block.

      See what else is bein developed in the area and get an architect to draw plans and get planning permission (probably a 12 month exercise). If you sell the block with plans (because developers don't need to spend 12 months to get planning permission) you'd probably spend $15k - $20k and get an extra $100k

      Planning permission is not hard to get but it takes a long time because councils are like an monopoly. They just do their own thing.

      • dandosr on 24/04/2022 - 20:45
        +3

        There is a lot of cost engineering / profit maximisation that goes into a design. A low rise residential development would be easily 50k to get it to DA then if it isn't what the developer is after - haven't added anything.

        • netjock on 24/04/2022 - 22:24

          If you are right then why are people selling blocks with plans and planning permission.

          People are just doing it because they got money to burn and nothing else better to do.

          600sqm block you'd be lucky to fit 3x 2BR town houses on there (and there aren't going to be many layout options for such a small block)

          I'm doing a development right now. People telling you there is a lot of cost engineering and profit maximization on low rise two to three stories is just telling you smack and trying to swindle money out of you. But that is what builders and developers would do.

  • wartortle on 24/04/2022 - 22:27
    +3

    I've dealt with many developers in situations similar to this - the key is to remember they will work form a 'mathematical' point of view by estimating total sale price after they develop and working backwards to figure out what they can afford to pay. They are rarely emotional about the purchase and will often walk away if it becomes "too hard" or too expensive. Be wary of offers where they promise what seems like big prices but long settlement and low deposit (eg $10k deposit and 12-24 month settlement) since they're actually punting on the market going up and will potentially walk away in 12-24 months time if they're price isn't matching current market when settlement rolls around. Also be wary of offers where they'll do a Joint Venture (JV) or offer to "trade" the site for one of the to-be-built properties.

    Best option from my experience? Just list it for auction when they're ready to sell. Assuming it'll be 2-4 dwellings (not apartments) it's usually the builders or the semi-professional developers that will pay a bit more. Builders in particular are good too because they will construct at cost which means they can operate off a lower margin and therefore pay more for the site. In almost every scenario I was involved in, it was rarely the 'big developer' that knocked on the door that ended up offering the best price.

  • morse on 25/04/2022 - 02:18
    +1

    They may want to also consider ageing in place if they are well. Being close to the station and remaining in the community they know can have some advantages when getting older. It does depend what’s going on around them, but if they are looking to sell it might be better to just sell it on the open market to get the best price.

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