Closing date on an overpriced property

[UserNameNameNameUser]

There’s a property that I am interested in as a development opportunity. We own the neighbouring property, so it is probably of more value to us than to others.

It’s been overpriced by a factor of 5-10 according to a valuation we had done, and we understand there has been little to no interest in it, but the estate agent has put a closing date on it.

Would I be right in thinking that it’s probably just to drum up interest? Create the illusion of demand. Is this a common tactic?

Factor of 5-10...so 5 to 10 times too expensive? Someone has to have made a mistake.

Not a mistake, just wishful thinking on their part.

I guess it doesn’t make any difference. We will put in an offer at the highest we are prepared to pay but we’ll below asking price.

I just wondered if my speculation was likely to be correct i.e. it just to create the illusion of scarcity.

TBH we would even have offered a little more if we weren’t rushed by the closing date.

If you're only going to be offering 10 to 20% of the stated price, I doubt offering a bit more would make a difference.

I think you mean by 5-10k, not by 5 to ten times the asking price (which is what 'a factor of 5 to ten' means)?
It doesn't matter what the agent has said. If the date comes without an offer will they withdraw the property?
Offer whatever you think it's worth. And no, it's not a common tactic, it usually is used if they have had multiple offers.

I am well aware of what a factor of 10 means 😂

The property is worth £20-40k as an agricultural shed, without planning permission. There have been many similar sold locally. They are asking £200k for it. We believe it’s because they know we want it. No way are we going to pay that much for it.

Why not just offer what you're willing to pay?

Is it not the cost of the land that will be worth £200k? To knock down the shed and build on?

But to answer your question, no, that's not a common tactic. They would only really set a closing date if there have been more than two offers / notes of interest.

Yes, that’s what I said we would do upthread.

I was just curious as to whether it is a common tactic to set a closing date to try to drip up offers and create the illusion of competition.

I guess I was hoping for a bit of estate agent insider tactics info.

Why do they know you want it?

Is it more valuable to you then too others?

They're probably selling it as a potential development site, not as an agricultural shed, and if that's the case the valuation of £20-£40k is irrelevant.

The shed will have development potential under permitted development (class Q), regardless of whether actual planning permission is in place at present. Permission will still have to be applied for, but as long as it meets the permitted development requirements, it will be granted and will cost next to nothing to apply for. Imagine a scenario where you buy it at the higher end of your valuation, develop it into a 4 bed house on a decent plot in the middle of the countryside under class Q, then sell it for £400k - the buyer is hoping to take a bite of the cherry before selling, without taking any of the risk themselves.

It sounds like this is a dilapidated 'modern' shed rather than a traditional barn, but lots of these types of buildings have been converted into houses since the rules on permitted development changed.

If the site was a building plot with planning permission for a house, would you be surprised at the £200k valuation? Obviously it's impossible to tell for sure without seeing a link and knowing more context (and I realised that would be really outing), but it sounds like that's how the vendor is viewing it.

Pay particular attention to covenants. You might be liable to pay a percentage of the uplift in value on the grant of planning permission.

I'm a rural surveyor and have worked for landed estates for years. We're always flogging this sort of stuff and round here (Cornwall) people will pay silly money for these kinds of places, because they're like gold dust.

As to whether the estate agent is employing tactics to generate interest, it's hard to say but I wouldn't usually expect to put a closing date on a property that's not generating any interest. Have they asked for best and final offers?

You would be buying your privacy and you need to consider how much you don't want someone else to buy it and have control over 'next door'. We live down a lane in the middle of nowhere and have one neighbour (lovely) next door. She's older and has no family around here so will likely want to sell at some point. Thankfully she has kindly offered us first refusal when the time comes. We don't particularly want the property because it's a tiny, dilapidated, dark 2 bed cottage with a massive garden and we already have loads of outside space to maintain, but we will have to find the £250k to buy it and then the additional £75k to renovate it because it will probably be our best and only chance to get control of it. Luckily she's fit as a fiddle and bright as a button, so I'm hoping we've got a while to save up!

Good luck with it. It's hard to know what to do but you can only offer what you can afford and what it's worth to you.

I agree with pp that you need to place a value on how much you don't want someone else buying and developing the site, or the current owner developing it.

Marketing property at inflated prices generally means that they don't really want to sell.

Would you consider making them an offer that gives them only what you consider to be its real value now, but with a covenant to give them a set (small) percentage of the increase in value that you later add to the development which they only get when you or your heirs sell the property.

Thanks for the replies. Apologies that yesterday I missed the responses saying it is not a common estate agent tactic and would only be done when there are multiple offers. That’s really helpful, thank you.

I also appreciate the detailed answers about development, but should perhaps have explained that I have a good planning consultant that I have worked with for some time. For reasons too long to list we are sure this is not a potential development opportunity other than in combination with our property. There are also many larger plots available locally for less.

Unless it comes with planning permission no chance in hell would I pay that much over.

@UserNameNameNameUser why do you want it? will it add value to your property?

Additional garden ground. Possibly a garage. A couple more parking spaces for visitors rather than parking in the lane. It would add £20-30k to our property, so I would stretch to a bit more than that, but I think the seller has become convinced that we would pay through the nose for it.

A "development opportunity" does not mean much without pp in place. Offer what it is worth as is, plus an uplift for your personal interest. How likely is permission to change its use and build residential to be granted, are there local precedents?

if I was them I would want at least 50k so I assume they are playing hard ball.

It might be that they are only willing to part with it for £200k ono otherwise they are happy to keep it.

I wouldn't usually expect to put a closing date on a property that's not generating any interest. Have they asked for best and final offers?

I agree with this. It's very unusual for the estate agents to put a closing date on the property if there's no interest. I suspect there's at least one offer on the table, and because they know you want to make an offer they have given a closing date so it doesn't drag on.

Thanks again. All really useful inputs and giving me food for thought.

So from what you are saying, seems most likely there is at least one other offer. And yes, possible they might just keep it for potential future value.

@rockyg you say you would want at least £50k. Would you be able to explain why that figure?

well I don't know the area but if you think the added value is 30k ish I would want more than that. By nature you will be conservative, they will be optimistic

where I am, more garden, a garage, off street parking would add a huge premium

I'm just wondering what you decided to do? Did you put an offer in?

We offered what it was worth to us, which was a bit more than it was valued at but a lot less than the asking price.

They said it wasn’t enough and that they would keep it on the market. There were no other offers.

I suspect they are under the impression they can use it as a ransoms strip, but we don’t actually need it and I’d rather just keep the money in the bank.