3 Tricks Developers Use to Buy Development Sites for Under Market Value!

3 Tricks Developers Use to Buy Development Sites for Under Market Value!

We all know the stereotype of the snake oil salesman like developer. Not all developers are like that, but it’s true that there’s still plenty that fit that type.

I thought I might reveal the latest tricks that these guys are using to convince home owners into selling their houses for under market value.

Each of these tricks has the same objective – to get home owners to sell their property for under market value. And in each of these scenarios the same thing happens:

These properties have a value as a house and a value to a developer. If the developers are interested it’s almost a certainty that the property is worth more to a developer.

I’ll use an example of a sale I saw recently.

A property was worth approximately $550,000 as a house, but the value to a developer was around $750,000. The developer approached the old lady who owned it and convinced her that the property was worth $570,000 as a development site, but that they would pay her $580,000. So the developer bought the property for $580,000 and essentially picked up $170,000 at the expense of this unaware old lady.

Here’s three things that they are doing at the moment to try to pull off these types of deals.

1. Letterbox drops

Owners of properties suitable for development get things dropped in their letterboxes by developers from time to time.

Flyers or letters with tag lines such as “Interested in selling?” or “We buy houses” are common and developers do it for a reason – it works!

Owners need to be careful of these. These types of things end up in letterboxes for one reason – these developers want owners to call them and once they call they are going to negotiate with to try to purchase the property for under market value.

2. Sending their agents along

This one can be a little confusing for owners.  Developers often retain their own agent (known as a buyers agent) with the aim of purchasing the property off market.

Bringing an agent in seems to legitimize the transaction, but the fact is that the agent is working for the developer, not for the home owner. The job of this agent is to buy your property for a little as possible and on occasion these agents are given a bonus for purchasing properties for cheap.

3. Door knocking

Some developers are bold enough to go straight up to houses and knock on doors.

They knock on the door and will introduce themselves. They seem sweet, but again they do this in the hope that they will be able to negotiate a price under market value.

The lesson here is simple; if you sell your property a developer directly it is unlikely that you are going to get the maximum price for your property.