Has anyone been offered an option to purchase by a developer?

[PerditaMacleod]

My house has just gone on the market yesterday. We haven't had any viewings yet (some booked for next weekend) but already the estate agent has called to say they know some kind of developer who is interested. It's an end terrace house on a large corner plot, and he wants to build another small house on the end.

He has mentioned a 6 month option to purchase, which I had never heard of before. He would offer at least asking price, possibly more, would need to pay a sum of money up front, and he would try to get planning permission and would have 6 months to do so. If he wasn't able to get planning permission, or he decided to withdraw, he would lose the money he had paid up front.

There are pros and cons - pros, we get a premium for the house, and assuming he gets planning permission, which he should, as there are other similar builds in this area, the sale should be guaranteed to go through. Cons - it could take 6 months for the sale to go through so I'm worried it will make us less attractive to whoever we try to buy our next property from. On the other hand, we're then not relying on a buyer who can just change their mind with no penalty, and if prices fall next year, the developer will be committed to buy at the pre-agreed price.

Just wondered if anyone had experience of this and how it turned out. We have a good number of viewings next weekend, and today we've had a lady knock at the door, so hasn't even seen inside, saying she's definitely interested and wants to buy the house. If she were to offer asking price, I don't know if it would be better to accept her offer (FTB) or the developer's.

If I were you I would take the developers offer, making sure the uplift, if he gets pp, is substantial.

Otherwise I would get planning permission myself and sell the building plot.

Or you could get a covenant added to say they need to pay you x amount if they get permission/build a house on the garden within x number of years.

I wouldn’t be selling to anyone else without the above provisions in place as they’ll simply build the additional house and you’d have lost out on a lot of money!

Exactly that, there is nothing stoping you getting the permission and even buildig yourself, make sure you get compensated accordingly.

The only experience I have of this is with some friends who took the developer option. The whole thing turned into a long and grisly nightmare for them, they lost the house they wanted to buy because the sellers got sick of waiting and then couldn't find anything they wanted when the developer wanted to proceed. The developer called all the shots because they'd paid for the right to do so.

They didn't enjoy the process at all, I'm not sure the extra cash was worth it in the long run.

I guess it comes down to the money and whether you think the extra is worth it!

That sounds stressful but I suppose it depends how desperately you need to move. What percentage of the asking price is the upfront amount he couldn't get back? Probably worth going over with a solicitor too to ensure all as you expect.

Thanks everyone - that's really helpful. We had considered in the past getting the pp ourselves, but I suppose what it comes down to is the cost, delay and hassle, and we certainly don't have the skills or the funds to consider building ourselves. Annoying to think that someone else can make a lot of money from our property, but I don't think the profit for us would be worth the stress and inconvenience.

@RNBrie - that's what I'm worried about, I was thinking exactly of those kinds of issues in finding our new house.

We are meeting with the estate agent again this week so we don't have any details yet. I guess we'll wait til after the viewings anyway and see what other offers we might get, if they're likely to be more straightforward. We're not in a massive rush to move, but ideally it will be before September when DD starts school.

Why don’t you just get planning permission and put your house on the market with it ?

You don’t have to build it to get the added value.

I would NEVER agree to sell my property to someone who had a 6 month option on theirs. Developers are notorious for messing around like this.

BTW the estate agent is supposed to be working for you, not his mate the developer. I’d take anything he says with a pinch of salt.

MIL did this. It dragged on and on and on. She'd agreed the 6 months to get PP, but not factored in that it would take 3 months to even get the option agreement signed! Things like the option fee, timescale between 'exercising' and completion etc all went backwards and forwards.

When the option to purchase was in place, she was stuck, she could not pull out, she could not sell to anyone else, she could not renegotiate timescales or price, she could not re-market it - basically the developer had a legal right to buy it at the agreed price and she was completely stuck. Also, she had no certainty because the option only bound her to sell it to the developer, not the developer to actually go ahead and buy it! He could have got the end of the 6 months and walked away, just forfeiting his deposit.

She also had to allow all sorts of architects, ecologists, surveyors, highways people, council etc to come to her house to do their planning reports.

If planning permission had been declined, it could have had a negative impact on value and he'd have only lost his deposit and the planning application costs.

In the end the pp was granted and the sale completed, but not without last minute dramas where he tried to extend it. It took 10 months in total from the first 'offer' to the completion and was incredibly stressful....

Thanks @lindonsaint. That's the kind of thing I'm worried about so good to hear about this experience.

@S00LA yes I'm sure lots of people would be wary of selling to someone in that position. I know I would be, and I don't want to make finding a property to buy any more difficult. We've thought about getting planning permission before, but there are a few different options so not sure how useful it would turn out to be.

I'd wait for other viewings and see what the offers are (if any), surely he can wait a week, or is he pressuring you for a quick answer?

No, he's not pressuring, he hasn't made a formal offer yet. In any case, we'll definitely be waiting to see if we get any other offers. If we can get another asking price offer without the conditions it would be preferable.

@Catmummyof2 thanks, that's a great point about the conditional contract, there's no way we would take it if it was just an option so we'll see about that when we talk to the agent.