The bargain bungalow
Paul Singh reports on how he purchased a property below market value and how, together with EEDN, he goes about renovating it.
The Estate Agent laughed at me on the phone when I made my offer.
“My client will never except that, there is almost no point going back to them.”
That was my second offer on the property increased by £5,000 having originally bid £35,000 under the asking price. Given that the agent had only just recently reduced the price by £40,000, my latest offer would be a whopping £70,000 under the original valuation. I did not have a chance.
Or did I?
Or did I?
Luckily, as much as I have a difficult relationship with a lot of Estate Agents, I do admire how they can put up with a pain-in-the-backside QS like myself – and still smile. She went back to the sellers and they accepted. I knew they would because I did my research.
The property had already been up for a few months before they lowered it by £40,000. The owner’s wife had died, and he understandably did not want to live there anymore without her. The agent advised that if he put £15,000 into a refurb then it would sell at the original asking price. He chose not to probably because they did not have the funds.
I also knew that most of the big house builders have been busy over the last couple of years on large scale developments in the area and have therefore been neglecting hidden gems like this.
I also knew that Christmas was coming up and “nothing sells at Christmas”. For them to get another cash buyer in for another couple of months would have been something Santa would not be able conjure up.
All this was said to the seller’s agent and she did the rest of the work for me even though it would have most likely left her with less commission.
How did I do this?
There are many conventional and objective ways of getting information about a potential purchase. My ones are as follows (although there are many more):
- Land Registry
- Zoopla and Rightmove
- The Deeds to the Property
- Solicitors’ Report
- Surveys
- Architectural Drawings
- Gov.UK Website
- Google Maps
What all the above have in common, however, is that they are obtainable by almost anyone who takes an interest. For example, anyone could have found out that the bungalow had been up for a few months and the price had been lowered by £40,000. What they would find difficult to obtain is the true reason for it and would have probably discarded it as too risky.
If you want to find a bargain, you are going to have to do what a lot of people avoid doing (especially those who don’t own a business) and that is undercover networking. The problem is that, unlike formal networking events where both people mutually attend with the intention of sharing information/contacts etc., you are basically trying to extract data from hyper-cautious strangers. There is no formula for this, you will have to use your own charm and social skills. My own personal technique is to approach people in a non-threatening, understated way like Columbo and to network with as many people as possible.
However, if you get it right then this has the potential to earn you an extra 10% profit of GDV. The following is a summary of my appraisal with the property bought at (1) the original asking price and (2) the actual purchase price:
Original
Total GDV: £375,000
Costs
Costs
Development costs: (£48,188)
Land costs: (£289,001)
Total Costs: (£337,188)
Gross Development Profit: £37,812
Profit % of GDV: 10.1%
Actual
Total GDV | £375,000
Costs
Development costs: (£48,188)
Land costs: (£259,001)
Total Costs: (£307,188)
Gross Development Profit: £67,812
Profit % of GDV: 18.1%
Costs
Development costs: (£48,188)
Land costs: (£259,001)
Total Costs: (£307,188)
Gross Development Profit: £67,812
Profit % of GDV: 18.1%
In relation to the bargain bungalow, the following people were crucial sources of information for working out which strategy to take when negotiating the purchase price:
The seller’s Estate Agent
Companies have reputations and where there is smoke there is fire. Without naming names (although I may not have to!) some Estate Agents are known for playing dirty to get the sale. If you are unlucky enough to have them to deal with when purchasing, forget getting any form of reliable information from them. Luckily, the company I was dealing with had a good reputation and were very open about the seller’s situation. I just booked an appointment at their premises (so you know they have some spare time) and chatted to the agent. This is how I found out that they were desperate to sell, and the sellers did not have any money to spend refurbing the property.
Companies have reputations and where there is smoke there is fire. Without naming names (although I may not have to!) some Estate Agents are known for playing dirty to get the sale. If you are unlucky enough to have them to deal with when purchasing, forget getting any form of reliable information from them. Luckily, the company I was dealing with had a good reputation and were very open about the seller’s situation. I just booked an appointment at their premises (so you know they have some spare time) and chatted to the agent. This is how I found out that they were desperate to sell, and the sellers did not have any money to spend refurbing the property.
Other Estate Agents
Small Estate Agents are more approachable than the chains. Just walking into one pretending to be a customer can lead to conversations where you can learn a great deal about the profession and area. I went into a couple of premises nearby and got into a 20-minute conversation with one agent who told me that nothing sells at Christmas time.
Small Estate Agents are more approachable than the chains. Just walking into one pretending to be a customer can lead to conversations where you can learn a great deal about the profession and area. I went into a couple of premises nearby and got into a 20-minute conversation with one agent who told me that nothing sells at Christmas time.
Friends, family and colleagues/business associates
My father-in-law put me in touch with his neighbour who used to own an Estate Agent. I also met another owner at a business networking event I attend every Wednesday morning in my area. They are now my go-to contacts if I want to bounce ideas, information and generally get reassurance that I am on the right track. These two were not found by accident. They both confirmed that it was the bargain of the century before I completed the purchase.
My father-in-law put me in touch with his neighbour who used to own an Estate Agent. I also met another owner at a business networking event I attend every Wednesday morning in my area. They are now my go-to contacts if I want to bounce ideas, information and generally get reassurance that I am on the right track. These two were not found by accident. They both confirmed that it was the bargain of the century before I completed the purchase.
Local residents
When I was viewing the property, the neighbour was outside doing maintenance of the front garden. I went over to stroke her dog and then introduce myself. I was very open with my intentions for the property which I guess she appreciated. We had a nice conversation about the seller and she spoke about how she, and a lot of other residents, were against all the proposed new developments in the area. She blamed it on a couple of big-name builders who have had the majority of major work for a number of years.
When I was viewing the property, the neighbour was outside doing maintenance of the front garden. I went over to stroke her dog and then introduce myself. I was very open with my intentions for the property which I guess she appreciated. We had a nice conversation about the seller and she spoke about how she, and a lot of other residents, were against all the proposed new developments in the area. She blamed it on a couple of big-name builders who have had the majority of major work for a number of years.
Local Developers and Builders
Every construction site has one of those people. You know, a local resident that sticks his nose into the site and asks a lot of questions to anyone who will answer. Well, I am sometimes that person. It’s remarkable how much information you can learn from a Site Manager or Foreman. I learnt that day that they have had so much work on recently that they are feeling the pressure. They missed the good old days of doing small refurbs and new builds where you had more control and almost immediate gratification.
Every construction site has one of those people. You know, a local resident that sticks his nose into the site and asks a lot of questions to anyone who will answer. Well, I am sometimes that person. It’s remarkable how much information you can learn from a Site Manager or Foreman. I learnt that day that they have had so much work on recently that they are feeling the pressure. They missed the good old days of doing small refurbs and new builds where you had more control and almost immediate gratification.
This is when I knew this was my time to strike.
There is always a risk with property no matter how much research and networking you do. De-risking a purchase involves you to almost live and breathe the property somewhat obsessively. Property grooming, as I call it. The rewards of doing this however are massive and is the difference between whether you want to be like the many people out there worrying about their purchase or the few who make it look easy.
I like an easy life, don’t you?
I like an easy life, don’t you?