Is there a formula for working out how much profit a builder will make?

[NigellasGuest]

A builder has offered to buy our house for the market value - he wants to demolish it and build 2 smaller houses here. I roughly know what the market value for our house is, and also for 2 smaller houses. It doesn't seem worth his while really. Unless it costs a lot less to knock down a large detached and shove up a couple of semi's than I am assuming? Is there a formula or something - to work it all out and haggle with him over what he pays us
Any advice gratefully received!

Why would you haggle if he is paying "market value"? His profit does not concern you.

Echo what 7to25 said. Why does it matter? If he is paying market value, why would he want to increase his offer? Unless you have a line of other potential builders lined up who might like to offer on the house? Otherwise, any other potential buyer will pay what he is offering and no more.

well as I say, I only roughly know the market value.
I would like to be confident that I believe him when or if he says that it's not worth his while paying me any more than x amount. I would like to be as informed as possible before entering into anything of this nature, hence my OP.

Well, instead of costing the (assumed) costs and profit you should get a few valuations of your property and look at local sold prices.

I am going to look into what is costs to build a house. I can hopefully work things out myself. Yes there are other builders interested, not that it really makes any difference....

Thirds.

The land costs a third, the building costs a third, the profit grosses a third.

That said, a volume builder and someone who does two projects a year are going to be looking at entirely different numbers and profit expectations.

Best get a surveyor to value your house, not randoms on the internet .

thank you thesaurus! Thirds - I knew there was a quick ball park calculation.
Don't worry, I won't be getting internet randomers to value my house!

It's not thirds any more, these days it's more likely to be 45% land, 45% build cost and 10% profit.

Basically, it doesn't matter what profit he'll make, what matters is what your house is worth. If he is prepared to pay the 'market rate' then that's what your current house is worth, he can go buy a different one and do the same project, if he's offering you less than the market rate, then say no, if you can get more from someone else, then say no.

Get 3 estate agents round, say you are thinking of selling and ask them to value your house, what they'd put it on the market for and what the realistically think you'd get for it, ask what htey'd price for a quick sale or if you were happy to wait for 6 months or so. If what they are suggesting is about what he's offering, then if you want to move, why not just take him up on it?

I'm still puzzled about why it matters to you what it costs to build a house and therefore what his likely profit will be? Maybe he has a client in mind who specifically wants to live in your area and doesn't mind paying above the odds? Maybe he wants to build a house for himself? Maybe he will go bust after he buys your house and the plot never gets redeveloped? If you have received a fair price, none of these scenarios, or any others, matter.

I'm still puzzled about why it matters to you what it costs to build a house and therefore what his likely profit will be?

It's not an unusual scenario and there is a type of covenant/exclusion that you can impose whereby you can net some of the resulting development value even after a sale.

The most common scenario is when people buy permission from their freeholder to extend their flat into the loft.