Harriet and her partner have owned their property for nearly 25 years. With their children all grown up now, and the place falling apart a bit, they started talking about selling. Fortuitously, it was around the same time that my team sent Harriet a letter in the mail expressing interest in their property.
Would they be open to selling to me or to one of my clients? Or, alternatively, Would they consider developing their property together in a Joint Venture?
We traded a few emails – no, they don’t have an interest in developing, but yes, they’re open to a simple sale.
The first and most important step in any business dealing involves establishing mutual trust and respect.
Harriet visited my office in Ivanhoe, and asked me about my business as a Real Estate Analyst and Buyer Advocate. I shared some analyses on Melbourne and Heidelberg property trends, and some stories about recent clients I’ve represented, properties I’ve purchased, and developments I’ve completed.
And, we spoke openly and honestly about the pluses and minuses to her property:
- Good sized block of 1260 square meters, with a regular shape; dead-end street; close proximity to shops, trains and parks; within an important school catchment zone; reasonably progressive zone for development
- But, close enough to the main road to cop some noise; neighbouring properties are older unit developments that look tired; decent slope to the block, as well as a couple very large trees that would need to be designed around
She was obviously interested in what I thought her property was worth, and I showed her the written feedback I’d attained from local agents that put the value at about $1.4m. I also pointed to a few recent nearby sales that supported this estimate.
Harriet appreciated how open I was with all the information I’d gathered, and was relieved that I wasn’t behaving like a pushy sales agent.
She, in kind, told me a bit about her family circumstances: kids heading off to post-secondary schools; her and her partner easing into part-time employment with an eye towards retirement in the next 5 years; their need to get their financial house in order; and, her anxiety about selling their biggest asset without a clear plan as to where to move to next.
She was hesitant, but open to selling to me, so we agreed on some simple next steps needed to move the discussion forward…
It was important to both of us that that we get as much advice as possible to inform the transaction.
I certainly didn’t want to take advantage of her, and equally, she wanted to approach things methodically and carefully. So, Harriet committed to contacting 2-3 local agents over the coming fortnight in order to attain independent advice around the market value of her property. And, she said she’d contact a Conveyancer to put together the Vendor Statement and associated Contract of Sale (which she’d need to sell her property to me or to anyone else down the track).
I committed to examining the property in more detail, with advice from my Town Planner, Architect and Arborist, and with reference to the Vendor Statement she’d provide. The aim was to catch up again in two weeks time to talk seriously about sales terms.
The best negotiations lead to Win-Win results, and we achieved this together
The two main terms that need to be agreed upon between buyer and seller are: price, and settlement period.
Harriet spoke to 3 different agents over the fortnight who all came to her property and assessed its value. One agent talked mid $1.3m, another $1.4m, and the last tried to persuade her that he could get her $1.6m!
Now, Harriet’s no mug, and she recognised that the young bull of an agent was probably a bit optimistic (and, may actually be full of it!). She knew that selling directly to me would save her about $10k in advertising expenses and $30k in agent fees, and would also spare her the painful experience of opening her property to inspections and the stress associated with auction day. But, she obviously wanted to sell on the best possible terms.
My detailed analysis of the property went well. A few nasties were uncovered around Tree Protection Zones and Aboriginal Cultural Sensitivity Reports, but ultimately, my team had done a good job in identifying this as a suitable development site.
Was I going to pay $1.6m? No, absolutely not. But, I was willing to pay a bit of a premium for a long settlement period of 18 months.
Would Harriet accept 18 months? Yeah, the long settlement period actually appealed to her – it would give her enough time to ‘get her sh!t in order’ as she put it.
I’m quite happy to negotiate face-to-face, but in this situation it didn’t feel right. This was a massive decision for her (for me too, but I’ve bought and sold dozens of properties, so was confident), and we agreed to go away and think on things.
Ultimately, our negotiations lasted over 2 months. During that time, we traded a fair few emails, and I met with her at her property with an Arborist to firm up assumptions around the trees. After much discussion between them, they agreed that the long settlement was actually in their interest, as it would provide them the time and freedom to plan her family’s next steps.
Harriet eventually determined with her husband that they would feel comfortable selling the property for $1.47m on an 18-month settlement.
The $1.47m price was a bit more than I wanted to pay, but the settlement period would allow me to attain plans, permits, build contracts and finance before ultimately settling on the property. I would allow the 10% deposit to be released to her after the required 28 days, and she would accommodate me with times in which my professional team (surveyor, town planner, arborist, architect, etc) could attend her property.
We’re both satisfied with where things have ended up. But, perhaps as importantly, we’re both really happy about the whole experience.
It went unsaid during all the back-and-forth, but we each approached the negotiations with honesty and goodwill. Not everyone is trying to screw you! And, not every negotiation has to result in a winner and loser.
Selling your property directly to a purchaser does indeed carry its risks, and I wouldn’t recommend it to everyone. But, if your property is suitable for development, and you’re willing to take the time and expend the effort into getting advice from multiple independent professionals (agents, conveyancers, etc), then it is a great option.