Top tips for selling land for development
You may have inherited some land, you may have a large garden, you may have bought a bit of land as an investment; but how much is it worth and how can you sell it? Whatever the size of your land you will want the best possible deal.
Here, Dominic Bryant, Land Manager at Optimis Consulting in Bedford offers his tips on the best approach to selling land.
How do I know if my land is developable?
You may already have a gut-feeling; if you own a field on top of a beautiful rolling hill in a National Park development is unlikely to be suitable. If you own a pile of rubble in the middle of town, development on the site is likely to have a positive impact on the local area. Cases are rarely this clear-cut however, so it’s a good idea to seek advice from industry experts. Make contact with planning consultants to get their view. Some will be happy to offer free initial advice, others will charge for a more detailed planning appraisal. A detailed planning appraisal will be a sensible course of action on sites where suitability of development is not particularly obvious.
What are my first steps in selling my land?
Investing in a full-page advert in a property magazine usually isn’t the best course of action; buyers will often pay a premium for exclusivity and working with carefully selected parties can put you in a stronger position to negotiate your preferred terms. Find an agent you trust with plenty of experience in the industry to work with you to create a marketing strategy that best suits you and your land. Asking other landowners for references and recommendations will be useful. Many agents will offer free initial guidance on whether your land will be of interest to developers. Agencies with planning departments will be able to offer some broad planning advice too. You may benefit from an agent that helps you all the way through the legal process as well.
How much will instructing an agent cost?
As with selling your house, the most common method of payment for agents is to take a percentage of the land price on completion, usually around 1-3%. A percentage based fee is a good way to incentivise an agent to find the highest price for your land. It is not uncommon for multiple agents to jointly market one site; it can be sensible to split the fee between a small agency with strong local knowledge and a national agency with a broader address book.
How much is my land worth and how do I maximise its value?
Surveyors will be able to give an informed valuation of your land, but in reality, a site is worth as much as a developer will pay. Generally speaking, the value of land is proportional to how much money a buyer can get from it. Agricultural land has value from the produce that can be farmed and sold. A field with planning permission for residential development has value based on what financial return can be made from selling the individual houses. Work with industry experts to identify the land use and development that will bring the highest value.
How do I get planning permission on my land?
It is possible to get planning on you own; however, it takes time and money that you have to be willing to risk. Obtaining planning permission for the right scheme is also crucial to maximise the land’s value. Often developers will want to run the planning process themselves to match their product.
Below is a brief overview of the four most common mechanisms of sale for land transactions; Unconditional, Subject to Planning, Options, and Promotion Agreements.
An offer is made to buy the land without any specific conditions having to be fulfilled other than vacant possession on completion. If this is accepted by the landowner the process of working towards exchange and completion will begin. This method of sale will typically enable the quickest release of capital but unless the land is being sold with suitable planning permission for the buyer to develop the site the maximum value of the land is unlikely to be achieved. Some “hope value” may be added to the price if the buyer is confident that they can make a profit. The amount of hope value will be dependent on how confident the buyer is that the value will increase and by how much.
Conditional/Subject to Planning Deals
The buyer and landowner enter a contract whereby the buyer attempts to gain planning permission on the land at their cost. If and when a suitable planning permission is granted the buyer is obliged to buy the land for an agreed price. This sale price will reflect the reduction of risk for the developer, and likely to be higher than that in an unconditional deal, but can take a number of years before the sale is completed, if it is ever completed at all.
The most common form of option in land transactions is a call option. Here a developer has the option to buy a site at any point over the period of the agreement for either a pre-arranged price or at a reduction to open market value. In all likelihood, the sale will be triggered by planning permission being granted, but the developer is under no obligation to buy the site. Options tend to be preferred on more speculative parcels of land.
Here the focus is very much on the landowner and developer working together. Both parties enter an agreement to maximise the value of the land through gaining a planning consent at the cost of the promoter. At the point consent is granted landowner and promoter market the land to secure the best price which is split by the landowner and promoter at a pre-agreed percentage. Promotion agreements are most suited to landowners who want to retain some level of control over their land throughout the sales process.
Author: Dominic Bryant