There have been a few articles in the main stream press regarding a pensioner aged 88 who had sold his Mews house. He had called a local agent, and the agent rather than offering to give a market valuation he instead asked the pensioner: what do you want for the property? The question itself reveals volumes. The pensioner replied he would be happy with a million pounds. The agent, delighted, promptly arranged a lawyer for the pensioner and exchanged contracts very quickly.
This is the same question the owner of the popular pawn braking store series on the TV asks his customers all the time as soon as they come in. He never proposes the price, and instead asks how much do they want.
The way and what question you ask is very very valuable; in this case it was worth almost £1million – potentially.
The neighbour of the pensioner, who happened to be a lawyer, found out what had happened and was understandably livid. Friends, family and neighbours joined forces and managed to rescind the contracts, which is a rare occurrence.
The reports in the press showed the property was later resold f or £1.81m, this was not true as Sow & Reap Investors we r e the one s that ended up taking i t , or rather only exchanged on it and never completed, they traded it on for £ 1.925m. This was never mentioned in the reports.
A few people had sent me an article on this property knowing we had been involved in the deal. The article states the original agent who had been involved in the deal stated it was a genuine error and apologised for what has happened.
The article states:
Mr Owen Hill died before the dispute was resolved, but his friends, family and neighbours were so angry that they decided to keep fighting to have the deal rescinded.
The deal was called off in July and the executors of Mr Hill’s will then sold the property on the open market for £1.815m. Bargets has now settled out of court for the legal fees incurred by the claimants.
Neil Stone, who owns Bargets Estate Agents, in Park Road, Regent’s Park, said the company had meant to have the deal rescinded immediately, but there had been delays.
“I personally apologise to everyone involved,” he said. “It will never happen again. We do not have a black mark against us as estate agents.
“I am a member of the National Association of Estate Agents and we co-operate with the ombudsman. It was a genuine error and we went to enormous lengths to rectify it.”
However I got speaking to one of our partners on a deal we have done recently and this story came up in conversation. He had told me the property had been exchanged for £1m and then resold almost instantly for £1.6m. Although the original contract for £1m had been rescinded, the second contract could not be. This buyer for £1.6m is apparently now suing the 2nd seller who had sold to him for £1m for breach of contract and losses. So the story gets even more convoluted. It will be interesting to see the outcome of this.
The thought that had naturally crossed my mind was would we have gone in and taken the 88 year old man’s property for half the price, knowing full well he didn’t have a clue what was going on in the outside world? And the answer I honestly arrived at is No.
There is a price we would have offered which would have been lower than market value, this is what we do. There must be a premium for offering a no-nonsense and swift exchange. I would have genuinely gone in at £1.75m on this deal, which I consider fair.
It is rare we have an opportunity to purchase directly from a seller, most of our deals get done through our network of agents and auctioneers. This provides a buffer from the actual seller and the onus falls on the agent to achieve the best price possible.
You cannot get more open than an auction place, this is the reason why many public bodies choose to dispose of their stock in this way. Anyone is free to enter and place a bid.
This is exactly what we did on the property we mentioned in last week’s article, in Plaistow, which we managed to purchase on behalf of a client for £258,000. The property in our opinion is worth £325,000 to £350,000. The property was sold by a Trustee in bankruptcy, the property comes tenanted and viewings were difficult. It’s a double fronted house and comes under rented, as the rent had been agreed three years ago and the market has moved on since then.
What caught my eye regarding this property was it seemed to be in the wrong auction, it was in a commercial auction and secondly it is a little on the outskirts . Also viewings would have been difficult. Therefore there was a chance we could grab a bargain; which is exactly what we did.
We aim to squeeze the maximum from this deal by getting planning for four flats on this property. We have already taken our architect’s opinion on this possibility and it seems there is nothing stopping us from doing this.
This will mean the end value for this property is expected to be £110k per flat which means the total end value is expected to be £440k on this.
After planning we will consider our options to resell with planning or carry the works through. When you have purchased a property in auction it is imperative to get the finances organised ASAP. Which is why we submitted the application the following day on behalf of our buyer, who seemed blissfully unaware of the urgency around this.
His application was declined due to bad credit score. We then had two choices, either purchase in another person’s name or take a bridging loan. We are currently proceeding with the purchase in a second nominated name. It may be prudent to keep a bridging loan ready on this deal just in case. Bridging companies are always lenders of last resort as the interest rates they charge can very easily turn a profit into a loss.
Park West Place, London, W2
Purchase Price: £565K
- Two bedroom beautiful apartment in a highly desirable location off Hyde Park Estate
- Comparable properties are priced at £1,083 per sq ft; we are offering for £854 per sq ft
- Worth more than £625k
- Long lease available
- Vacant possession
Sow & Reap
Property Investment Company
!Tips of the Week
Whether it is a BTL or Buy and Flip deal, the most important aspect is Location. Find a Property in desirable neighborhood where people want to live in.
When flipping properties first impressions count; pay attention not just to the inside of the property but the outside as well. You cannot show off all the upgrades done inside the house if potential buyers are turned off by the outside appearance and its surrounding.