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Boomerang Property Deal

8th July 2017

It’s a funny market at the moment.  The recent auction results from auctioneers who have a strong presence in the market place shows a drop in sales figures.  Savills had a 67% sales rate and Barnard Marcus had 68%.  Ordinarily, these figures have previously been in the 80s and even 90s.

This shows the market is uncertain at the moment, and sellers are not adapting to this change.  An example of this is where we were hoping to achieve a sales figure of £875k for one of our lots, however, the auctioneer advised us to place it in for a mere £800k; which we are happy to do, as we prefer to sell, and we need to give the freedom to the market to dictate the price, and not impose our expectations on it.  The auction is due on the 19th July 2017.

All you need is two people who want the same property, as was demonstrated by a property we were offered in Hyde Park which we were told we could close for £2.7m.  Fierce bidding drove the price to £3.25m, this is in stark contrast to the what’s going on in the market.  It seems people want what they cannot have; and this is the psychology which drive prices up in the auction rooms.  However, if the guide price is high you cannot whet the investors interest to begin with.

We too are in the midst of not a bidding war but a contract race.  The property in question is a very large flat, laid laterally, in a well-known block close to Marble Arch.

We have been tracking the property for about seven months now; we went for it originally and someone had offered a higher price.  We then sat back down again.  Funnily enough I happened to meet the buyer who had managed to get himself an option agreement on the property.  The option was due to run out and he wanted someone else to step in and do the deal for a couple of reasons.  One, he didn’t want to lose face with the agent, and secondly, he wanted to charge a premium for the privilege of ‘buying’ the deal.  However, the sand was slipping from his hands, and soon the property would be offered out again.

Sure enough the property has come back in our laps, although it now comes with a contract race.  This means there are two buyers for the deal, contracts are issued at the same time and the one to cross the line wins the deal.

We have been in this scenario a few times before, and most of the time have won the race.

It takes a commercially minded lawyer, one whose every step is not focused on covering himself but on getting the deal done.   It also requires one to take views on various variables, which may not be fully known in advance.  Things like the service charge, and any major works due etc.

I was not too worried about the race, rightly or wrongly, as it tends to focus the lawyers to get the deal done; and we have the right lawyer on our team, especially selected for executing fast.  The last deal he did for us was exchanged upon within three days of receiving papers.  When focus is not there, it’s like a piece of string, it can take as long as you give them.

We should exchange on this property within this week, or not as destiny wills.  My feeling is that we will grab this deal. It will be a lucrative one for our investor.

The property is a clear 35% below market value, and it’s in a very popular block for rentals and resells.

Suresh Vagjiani

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