PROPERTY owners keen to boost their sale price are teaming up with neighbours to entice developers to make big offers for “super lots’’ according to new research.
LJ Hooker’s latest White Paper on neighbours amalgamating properties and selling for development, joint property ventures are on the rise.
In one recent case, 11 owners achieved a total of $90 million for land which would have sold individually for between $55 million and $70 million.
While the rewards can be massive through the emerging phenomenon, LJ Hooker Head of Research Mathew said not everyone struck it rich taking their property to market with their neighbours.
Although he said generally they would sell for more than through an individual sale.
Mr Tiller said the sale method had grown “exponentially’’ in the past five and there are no hard and fast rules about how sellers approached the deal.
“They can really sort of not sign any agreements between them and sell individually as part of an amalgamation (so the buyer pays them all individually) so you would have say a real estate agent sort of co-ordinating that,” he said.
“Or all the neighbours could come together and form an official joint venture or a partnership or a company or sell an option off to a third party to sell the land off for them.’’
Generally the final sale price is divided up based on how many square metres of land each owner has.
“It sort of excludes what house or what fixtures and fittings are on the land and it just comes back to the basic land size,’’ Mr Tiller said.
“I am sure you will always have arguments between (some of the owners) saying my house is newer or I have a swimming pool, but really what the end buyer is wanting to acquire is not what is on the land but the land itself.’’
Mr Tiller said it wasn’t the sort of thing that would work everywhere.
“Really it is about two things, it is about the zoning of the land and the location of the land.
“In terms of zoning it obviously has to have the potential for a higher and best use than what it is currently being used for.
“So whether that is say rural land moving to residential land or single residential land moving to say median or high density land.’’
Finding a buyer for the amalgamated block might be fairly easy in a desirable location but Mr Tiller warned there were some risks.
“You have to be aware when you sell as part of an amalgamation that a lot of the buyers do so on a conditional basis. They make a condition in the sales contract that they will pay the money once the land is rezoned or once they get development approval.
“In that instance what you really need to ensure that the potential buyer is a reputable buyer and has a solid track record of delivery. So you really need to look at the buyer and who they are as well as how much they are going to pay.’’
Many of the deals do not settle in the normal 30 day period either. It can take sometime for development approvals or rezoning so sellers could be waiting for months to finalise the deal.
“Another risk is that you may have agreement upfront with all the neighbours and then at the last minute one pulls out because they do want to hold out for a higher price so you need to have that agreement upfront and you all need to be on the same page before you move ahead with marketing the property.’’
The White Paper outlined the case study in Perth where 11 owners joined together and sold for a combined $90 million.
The White Paper said the first step to amalgamating was to find out the current zoning of your property and your neighbour’s property — they are not necessarily the same.
Find out if there are any plans or potential for the future rezoning of your property.
Talk with your neighbours and make sure everyone wants the same outcome.