Developer Offer to SWAP old property for NEW property

Well offer meeting is organised for weekend after this. Lets see what they day

 

This 75% rule is coming in Nov 30 from what i understand.

 

Be sure to report back. This scenario is going to become common in Sydney - lots of older, smaller blocks will be targeted by developers. I have flats in three buildings like this, one of them in particular would be great development site.
Whatever offer the developer comes back with will be in their best interest. The swap deal is great for them because they effectively get the site without having to cough up any money - all they have to give is a promise.

 

All the more of a concern if they don't have to provide any of their own capital/feel some pain.

 

Yep will keep everyone in the loop

 

Hi All,

We had an initial offer over last weekend - they have given us a heads of agreement with an offer of $7400 per sqm

Verbally others have said $9000 per sqm (other developers)

We are only beginning the process ...

@ $7400 no one will sell - its roughly 100k to 150k above what ppl could comfortably sell their apartments for. (not including all costs etc)

We will likely do a counter offer over the weekend.

Keeps you guys in the loop

 

No - just reject their offer as too low and let them come back to you. You don't want to put a ceiling on the negotiation too early.

 

I agree with SNM, there's no need to counter-offer. Just reject their offer as too low. Be sure not to sign any documentation offered to you by the developer - including any heads of agreement or MOU (even if they are described as non-binding). If I were you, I'd do the following:

• reach an agreement with the existing lot owners. There's no point negotiating unless all owners are prepared to sell for the same price. I assume the total sale price will be divided on a per lot basis between owners.
• engage a lawyer (to document the agreement between the lot owners) and a property consultant to advise on valuation.
• There's really no downside to conducting an EOI process to gauge developer interest. Similarly, an auction where all lots are being offered for sale will allow you to control the process and you can walk away if the reserve isn't met.

As for the proposed swap of new for old, it wouldn't interest me one bit.

Best of luck. You only ever get to sell once, so make the most of it.

 

All great advice. Once you have everybody on board and a common agreement documented, there is nothing stopping you taking the block to the broader market i.e. other developers. Having that in place will make you more attractive to developers.

 

Cash is King

 

Hi All

Had second meeting with developer after we ignored their first offer and never responded back to the cut off date

New offer is $8000 sqm

What they are proposing is either cash

Or cash and an apartment type combo

Basically most ppl would be hitting 850 - million for properties with market value 600 to 800

I still think their is room to move up

Any thoughts

 

My thought is to follow @Stewart's and @Depreciator's advice.

 

Hi All,

Have not updated this thread in a few months .. so the recent news is

1. just knocked back an offer from developer to buy out each of the 13 apartments (various owners and designs) at roughly 1 million to 1.1 million cash (apartments worth anywhere 650k - 800k each)

2. second option offered by same developer at our request was apartment swap (like for like) + some cash roughly around 150k or so

3. The JV offered at our request by this developer was not great ...the end result of the JV would be about 1.2 million or so

Currently talking to a few other developers ...have stated to them that we are not interested in talking further unless these new developers begin the conversation at 1.3 to 1.4 million

 

Developer swap are OK but bear in mind a CGT event trigger occurs. You can be surrendering property rights for your home for a uncertainty or possible loss if they go broke during the build. You end up as a unsecured creditor for example. And if its hard to reach an agreement to sell its even harder to then also find that what they build is exactly your desired future home.So it can be better to just sell up and buy elsewhere

At present in Sydney there are stacks of overly optimistic vendors who all think they can get what the market was offering at its peak. The squeeze on developers is tight as they cant make any more $ and costs have escalated. Tighter lending for sales arent helping either.

One of the best guides is the real estate agent. My son does developer deals for a living and reckons 90% of vendors are dreaming of prices that are not viable. They have friends who are talking them up like a gold rush is on but reality is the numbers are tight for developers in most instances. He reckons 4 out of 5 deals fall over due to one neighbour who is greedy/stupid/arrogant who chases an extra $100 a sqm that isnt there. $300 a m2 can add $1m+ to a developers costs but he cant sell for a dollar more or increase yield. So they walk away over just $40K and lose the $400K extra tax free $ they get from selling to a developer. And then have to live in their house with irate neighbours. In a few instances he has seen the developer opt of of that single block and proceed with other neighbours leaving a isolated neighbour stranded with no ability to sell after that. Tip : Leave negotiation to a property expert. You could negotiate you way into a problem. Using your ears to negotiate is often better than a mouth.

 

So you're looking to profit between 50k and 400k.
Not enough. When you go buy something else, stamp duty will be 30k plus - you're no better off. What are the terms/options? Time frame?

The current offer I have is between 800k- 1.3M more (difference is bank value and REA val). I'm still not happy with it because of various reasons and refuse to sign until it's better terms.

 

1. We split via unit entitlements - ppls whose apartments are worth more will have more unit entitlements or larger entitlements hence they will get more - hence the range in end price

 

We are still searching and talking to various developers and considering various options - most recent offer rejected was around the 1 to 1.1 million end value range

 

Yes - most vendors are unrealistic and yes many developers are having issues.

We will not walk into a scenario where we are unsecured - one of the requirements is we get security or charge over property that is debt free in a apartment + plus cash scenario until the build is complete

Also not opposed to the idea of just selling up if the price is right

Completely agree on the idea that certain ppl are very unsophisticated and ruin very profitable and viable deals due to lack of knowledge and emotive reasons - hopefully I won't fall victim to that but it's very possible

Agree about the need to acquire experts at the right point or moment