The Mirage Deal
Last week I wrote about a piece of land we were looking to purchase, where the agent kept changing the goal posts of the deal. It transpired he was also selling a myth, a dream which could never be manifested.
The site consisted of 1/3 acre upon which, the agent claimed, one could obtain planning for 15-20 units on the site.
He claimed to have got this information from a planning consultant, whom they have a long standing relationship with and who furnishes them with complementary advice.
There was nothing provided in writing to confirm the basis on which they arrived at this conclusion from the planning consultant.
The agent even had the audacity to put this on their brochure.
One wouldn’t expect them to print something untrue, why would they as this would come out in the wash when the buyer does their own due diligence.
The cost of the site was £650K, with planning the value would have jumped to about £1M, conservatively.
A six month completion was offered. Seeing as this was offered, perhaps with a little negotiation this could be pushed to 7-8 months.
This meant the structure of the deal was very good for a planning gain, as for an exchange amount of £65K you could potentially make about £350K. This is an excellent return on the cash used for the length of time.
This would be an impressive return. The site could be funded with the benefit of planning or resold, probably via auction, to ensure the certainty of sale.
This is why we were pursuing the deal with some vigour. The packaging looked good, and it seemed worth trying to look past the changing of goal posts. Unfortunately, agents are known for massaging the truth, however, one would not expect an outright lie, even less would you expect this lie to be put into print.
It was on the assumption the sales particulars were true that we agreed the deal.
When we consulted our planner, his opinion, based on many years of experience and the parameters for density criteria, was you could only get 4-8 properties on this site.
This meant it was a dud deal. It is ludicrous for an agent to assume a buyer would not do a certain level of due diligence.
Saying this, I have seen investors turn to architects for planning advice and architects giving it. This is likely to be half baked, speculative advice, as they are not planning consultants.
It is not their forte. They draw the pictures, once they have been given the framework to draw them in.
So, it’s possible if the agent keeps punting the story they will find the one sucker who will close this deal, on half baked advice; it’s possible, I’ve seen worse.
It won’t be us though.