As property people we make our money through what is known as the three Ds; these are Death, Distress and Divorce. No matter how well the economy is claimed to be doing, these three are a fact of life.
Distress takes on many forms, and doesn’t have to be financial. For some reason or another people want to offload their property very quickly and some times very discreetly too.
As I write this article on Monday night I have just closed a deal a couple of hours ago at 9.45pm. A call came in and the contract has been sent to our lawyers, exchange is required by no later than midday tomorrow. The property is in Knightsbridge. I haven’t seen the property but I know when someone offers me a property for £600k and the property is 450 sq ft with a share of freehold, I know enough to say yes, blind, regardless of the state of the property.
I called one of our investors the same night and told him to do a transfer tomorrow morning, without hesitation he replied the affirmative and said consider it done. Emails were sent the same time to the lawyer to go ahead and exchange.
The property originally was to be purchased by someone who couldn’t perform so rather than letting go of the contract they pass edit on to an agent who in turn pass edit on to us ; with both parties taking a fee . I would estimate the value of the property to be in the region of £850k to £900k. We ’ re getting a solid deal which can be traded prior to completion, I ’m pretty sure. Again all of this could be premature as the deal is not done until it’s done.
So this is a live example of perhaps a distressed deal where the lady who was purchasing it certainly was under pressure, it is likely the original seller would have been a distressed seller as well; however we are too removed to tell.
There was another case where three partners who had purchased a couple of buildings and converted them to flats about 30 years ago wanted to offload, primarily because one of the parties was having financial issues and siphoning the rent to cushion his issues. They tried to sell the blocks with no luck. We agreed a deal at £1.25m with a delayed completion of 6 months, and on the condition we release the 10% deposit which equates to £125,000. This i knew would be a juicy carrot for them. They accepted. Our aim was to offload before completion in 6 months’ time. I dumped them in auction thinking this would be a sure sale. Surprisingly they didn’t sell. We had sensible reserves, one block was priced at £700k and the other at £650k. After the auction I had an offer for £700k from someone I knew. The other block we kept, 9 months later we got £975k for the block. The reason for the crap auction results was no reflection on the properties, they were good deals. The reason why these two properties didn’t sell but should have is because there was the Queens Jubilee and the Olympics, the mood in London was not to hunt bargains. It was as simple as that! The person who purchased the property for £700k was a very shrewd trader so there was meat on the bone for him.
Death is inevitable and is a certainty regardless of the state of the economy. However probate properties are not always bargains just because they are probates. The reason why sometimes this happens is because the beneficiaries are not too fussed about getting the maximum price, their aim is to get the money as fast as they can; and so the agent often uses this to pass on the discounted property to favored investors in exchange for a swift deal.
Grant of probate can be a lengthy process , and in between agreeing the deal and the completion if you’ re in a market like you are in now then this time alone will serve to raise the price on a deal you have not put money into.
Divorce is something which is on the rise; when couples are going through this, generally there are a lot of negative emotions involved and sometimes properties are put into auction without the other party knowing.
A while back we purchased a property on 92 Shirland Rd W9; a freehold block of five flats, which came up in auction. The husband had dumped the property in the auction, and the ex wife lived in one of the flats and was renting the rest out. Because he didn’t have access to the ASTs the property was put in auction with unknown tenancies. We had information from a local contact who knew the background of the story, you could call this insider information.
Knowing this we managed to get the block for £1.1m and 3 days later we resold i t for £1.3m, after exchange.
At times the complications surrounding a divorce can serve to lengthen the time between exchange and completion. There was a deal done on Durham Terrace in Notting Hill for£700k, nine months later before completion it was sold for £980k, and then again it was resold for £1.25m. No work had been done to the property. The long completion period was there because the partner’s family were trying to seize some of the assets and it took time to settle the court case; this delayed completion and in the interim the price only went upwards.
Kensington, London, W14
Purchase Price: £2m
- An end of terrace three storey Victorian building l 3,000 sq ft area
- End value after work expected to be around £3.15m
Call us now if you would like to have a piece of the pie!
Sow & Reap
A Property Investment Company
!Tips of the Week
In Central London you are unlikely to go wrong in terms of rentals and resell; apply the same to other parts of London and you might not be so lucky.
You should think about the funding properly when considering a property requiring work. BTL funding may not always work as this is based on a property which is ready to Let.