Making money from your back garden: should you sell to property developers?

Fancy making a pretty penny by selling off some land? With the current housing crisis and general undersupply of homes, developers are desperate for land to build on. So, whether you own a large garden or a field, bought a plot as an investment, or have inherited some property, now could be the time to cash in. Your land could be worth a small fortune to an eager developer. Let’s take a closer look at what this could mean for you.

Do you have the ‘right’ land that a residential housing developer might be interested in?

Before you do anything else, you need to check if your land has development potential. While an overgrown field in the middle of nowhere may not tempt many buyers, a scrubby patch near shops and transport links could spell big financial gains. But it’s not quite as simple as all that – and your assumptions of what your land may be worth could be totally wrong.

That’s where industry experts come in. Contact a planning consultancy or land development agency and arrange for an expert appraisal to assess the development scope and the true potential value of your land. Some may give free advice; some may charge for detailed planning reports. The more ‘difficult’ the site you have, the more professional help you may need to maximise its value.

Who should you instruct to help you sell your land to a housing developer?

Put bluntly, embarking on a land sale without professional help is a risky undertaking that’s not for the faint-hearted. Developers tend to drive a hard bargain, with abundant technical and commercial expertise at their fingertips to outmanoeuvre any amateur.

But you don’t have to go there, and you definitely don’t have to do this alone. “With a trusted land agent by your side, they’ll be able to advise on and develop the right marketing strategy for your land and liaise with all stakeholders to produce the best outcome for you,” advises one land sales expert.

Ask around for recommendations for a land agent with the right expertise to help market your plot, who can guide you expertly through complex deals, and who can achieve the best possible price for your land, all the while avoiding any newbie blunders.

How much value should you be able to extract from the sale of your land?

Now we get to the interesting bit – how much money will you be able to make? While surveyors can give you an accurate valuation of your plot’s current worth, the real value lies in the development potential of your land. In other words, your plot’s true price tag hangs on its projected profits.

If you get planning permission for developing your field or plot, the potential profit that can be made from selling houses built upon it could suddenly transform your humble plot of land into a little goldmine. This is why it is so important to work with a savvy land agent who can determine the optimal use, seek the best development and maximise the lucrative prospects for all stakeholders.

Do you need to get planning consent for your land before you sell?

Sellers can make the biggest profits by obtaining planning consent for their plot for sale. That said, developers will often want to be in control of the planning process so they can tailor it to their exact requirements. There are several known sale mechanisms for land transactions – here are the four main ways to market land for sale:

1. Unconditional sale

An unconditional land sale provides a straightforward and expedient way to sell your surplus land – sold as seen and with vacant possession upon completion. However, disposing of your site without planning permission is unlikely to realise its full underlying value, while a fast, unconditional sale will sacrifice the premiums attracted by development potential. If you are confident of a buyer’s projected profits, you could negotiate an uplift reflecting an additional ‘hope value’.

2. Conditional sale

A conditional land sale sees the buyer contractually obliged to purchase your site at an agreed price, but only once they have secured the requisite planning permission – at their own cost and risk. As the developer carries less risk, conditional deals can achieve higher valuations. They also allow both parties to commit early. However, completion relies on buyers overcoming planning hurdles, which can take years or fail entirely. Your returns are left hostage to an uncertain outcome. If left waiting indefinitely, you may miss alternative sale opportunities.

3. Option agreement 

Option agreements let developers shoulder the risk and cost of securing consent. You simply grant them the option to buy your site within an agreed timeframe. The sale completes once permission is obtained. This locks in land access for buyers, while rewarding you with valuable uplift. Negotiate a price or percentage of the increased market value after approval. The more potential profits, the sweeter your deal. This is the most common form of land transaction.

4. Promotion agreement

Land promotion agreements are an increasingly popular alternative to outright sales. This innovative model aligns the interests of landowner and developer to mutually maximise land value. The developer pays an agreed premium for promotion rights. They then take on the risk and cost of securing planning permission. Once consent is achieved, the site is marketed and sold, with net proceeds shared between the parties per a pre-determined percentage split. It’s a collaborative approach that incentivises the growing development value to benefit both sides.

Final considerations…

Selling your unused land to property developers can seem daunting, but with the right guidance it could also net you a windfall. The current high demand combined with short supply makes this a prime time to capitalise on your land assets.

Just make sure to use professional help every step of the way. Get your land properly valued and appraised. Work with experienced agents to determine the optimal sale approach. Market the site effectively to maximise interest. And carefully negotiate terms that protect your financial interests. Do your homework and let the experts steer you through the complexities, and you could walk away with a small fortune!

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