Why is it important to find out why vendors are selling their property? At my buying agency Black Brick, we tried to get our heads around this question by analysing transactions closed over the last 12 months.
Now we believe we have a better understanding of who’s selling, why they’re selling, and the magnitude of the price discounts we’ve been able to secure. We’ve identified that death, debt, divorce, developer or relocation are the key motivators. By asking more questions to find out why the vendor is selling, you can make the whole buying process quicker, easier and possibly cheaper.
There is a considerable difference in how much discount it’s possible to secure in each group. In the current market, anyone selling is doing so for a good reason, but it’s best to focus on properties with a motivated vendor.
New build developments that have been completed, or are about to be completed, can provide some of the best deals at the moment
The figures show that professional sellers – either developers (35 per cent) or landlords divesting rental properties (30 per cent) – account for the vast majority of properties acquired for our retained clients. These were the groups where we were able to achieve the highest discount from the asking price.
We have negotiated discounts averaging 8.9 per cent from the prices asked by developers, compared with 3 per cent from those selling an unwanted investment property. This is explained by the greater pressure developers face to clear stock that isn’t earning an income, and their general nervousness about the state of the market right now.
Data from Molior found rising levels of unsold development properties in London, with 1,500 complete but unsold properties on developers’ books; up 35 per cent year-on-year. That’s why new build developments that have been completed, or are about to be completed, can provide some of the best deals at the moment.
Landlords made up 30 per cent of Black Brick’s transactions. Tax changes are a key motivator for this group, but the savings negotiated were far less at just over 3 per cent as landlords have the option to re-let properties which don’t generate the capital return they seek and, with interest rates still at all time lows, there is often reduced pressure on this group to sell.
Read more: What's the property market like in Chalk Farm?
We have negotiated an average of 5.6 per cent from sellers looking to relocate. This group represented around a fifth of our transactions. They are often amenable to a low offer as they tend to have tight deadlines – usually associated with taking up a new job – and are therefore, highly motivated.
It is often said that London is the “divorce capital of the world”. The average transaction size of properties acquired where the sellers were getting divorced was a staggering £36.5m. These properties are often not on the open market, but the sellers have a real reason to sell and so good discounts can be achieved on rare-to-market trophy assets. This contrasts with an average transaction size of £1.3m in the unwanted investment category, which largely constituted smaller one and two bedroom ex-rental investments.
It’s important to find out the vendor’s motivation for selling as it can often make the difference between making an offer-price bid, or pushing hard for a discount.
