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A small local developer wants to buy part of my back garden and create an access road for 3 new houses. How do I value my land?

Asked on Jul 19 2011, House Prices in Reading | Report content

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  • I would talk to a independent surveyor about this, perhaps local agents could help as well.

    Answered on Jul 19 2011, Report content
  • You must get professional advice on this and don't accept the first figure that is offered. It may be that you have significant value in your land, particularly if there is no other way to get to the land behind your property. This gives you great negotiating power but you have to be careful not be greedy so that the project isn't viable for the developer or it won't go ahead and you will consequently get nothing. Talk to as many agents/surveyors as possible and find out as much as you can about the proposed project and it's value.

    Answered on Jul 19 2011, Report content
  • As a rule of thumb, if you control the access you could be entitled to about 1/3 of the land value. If your garden is also being used as part of the site then it could be worth more. I would need to know more detail about the proposal to help any further.

    Answered on Jul 19 2011, Report content
  • From original questioner: thanks for your responses. The builder suggests we value the access and the land by a "residual" calculation, i.e. subtract all his fees and build costs including S106 roof tax and a 20% gross profit for him (min required by his lender) from the anticipated sale price. Unfortunately this leaves a land value of barely 21% of the project's gross value (assuming planning permission is achieved), to be shared between the landowners and myself, much less than the 35-45% rule-of-thumb suggested by local estate agents as the land+access value for a site with planning. So we are struggling to reach a fair valuation! The S106 tax alone is £20K per 4-bed house in my area.

    Answered on Jul 20 2011, Report content
  • The developer wants to pay the least amount possible and you want to get the most you can for the plot. All of those items he is saying affect the value of your land are his problem really. If he needs your land to develop the overall site then he needs to make you an offer that you are happy with. It's as simple as that. The rest of it is irrelevant, from your perspective at least. If your land is the only way the developer can gain access to his land then you have a 'ransom strip' situation which means that all the cards are held by you. Like I said before though, don't be too greedy or nothing will happen at all.

    Answered on Jul 20 2011, Report content
  • Land is the most difficult purchase to come by and your agent's rough guide of 35-45% is something I would have suggested, though in the curent climate, with builder's costs going up (sustainable homes, new building regs etc) then I would suggest 30% of the developed value as a VERY rough guide. Each plot has it's own benefits as you will no doubt see and I do not claim to be able to value your plot remotely...

    Answered on Jul 28 2011, Report content
  • Hi, I am in a similar situation, but we are dealing with property acquisition agent who seems to be very reluctant to work on percentage basis. How much do you think we should be paid for the option (the non returnable deposit part) for the access road to the development of around 50 houses. The land agent seems reluctant to give us detailed information about the proposed development and offers a set price which is roughly a current value of the house + 50% of the current value and a 1K for us to grant him an option. We anticipate that once the planning permission it granted , it would be worth a lot more. We don't have a problem with him making a good profit, but don't want to be significantly underpaid. Any advice? By the way Matchmade I hope your experience was a positive one and you managed to get a fair price for your land...do you have any tips you could share?

    Answered on Mar 29 2014, Report content
  • I didn't go with the percentage valuation method because it seems to me to far too arbitrary. Every project is different and the tax levels on developers are now extremely high. To build 5 houses on my and my neighbours' land, the developer has to effectively give away 2 houses to a housing association (he would only be reimbursed the construction cost) *and* pay £25,000 per 4-bedroom house in S106 roof tax. The "residual" method seemed fairest: deduct all the fixed costs like construction; finance interest; a minimum 20% margin for pre-tax profits and unexpected build costs; planning costs like land surveys, bat surveys etc. The developer was very fair in breaking everything down. The residual land value was only about 20%, of which 25% went to me as I controlled the access, and the rest divided up on a pro rata basis between the landowners, proportionate to the amount of land they were contributing. The additional clause we negotiated was that if the final sale prices were higher than the original estimated Gross Development Value (quite likely at a time of rising house prices), the landowners would receive further payments following the original proportions. A final approach we considered was a "promotion agreement", in which the developer would offer the site on the open market after achieving planning permission, which would confirm its true value and satisfy all parties that our prices were fair ones. However we decided on the "co-development" approach instead, which meant the landowners would benefit, albeit at a later date, if the developer achieved better sale prices than expected. I did suggest true co-development, in which the landowners would put capital into the project as well as the developer, to save on finance charges. The structure would have been via a temporary limited company, but the other landowners and the developer felt this was getting too involved and a straight land purchase for cash arrangement was simpler.

    Answered on Apr 24 2014, Report content

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