Today I learnt the importance of doing a deal direct with the vendor!
So the story starts a couple of months ago. I had seen two flats for sale above a commercial property in the High Street in Poole. The flats were going to have new leases and were for sale individually with an advertised price of £99k each. This didn’t sound such a bargain, but I wondered what could be done if I was to try and buy both the flats. I booked a viewing and went to see the flats – I loved them. They needed a huge amount of work, but they had period charm and could be worked into something nice at the end.
However, the building needed serious work and given I was only going to be a leaseholder I was not happy to just buy the flats. I wanted control of the whole building and that meant I had to buy the shop and the freehold as well. So I suggested to the agent I would be interested in putting forward an offer in the region of £130k for the 2 flats, however I wanted to buy the shop and the freehold as well. The shop was vacant and needed a shed load of work and so I didn’t value it very highly (and I knew the bank wouldn’t either!) . However, the agent came back and said the owner wanted £200k for the shop. That meant it was a total of £330k for the building. I replied that was too top heavy and while the agent seemed to agree with my sentiments with regards the works that were required, he wouldn’t entertain my proposal of putting forward a lower offer for the building.
And so I thought, well I ‘ll bide my time, wait and try again shortly…or so I thought. While on a viewing for another commercial building going to auction I then happened to get talking to a local investor. And this is where appearances become deceptive. I had accepted his offer of an ice cream at the store he owns round the corner and which he runs himself. I knew the store and had seen him working there before and thought nothing more of it. But this ice-cream vendor had much, much more than I could have ever imagined – in fact he owned a good chunk of Poole High Street, residential properties in London, retail in Westfield, properties in Bodrum, student properties in Hatfield and much more! It was an eye opener for me and really goes to show how you cannot categorise people! This ice cream vendor was in fact a multi millionaire property guru! As it turns out he only opens the store in the summer for a few months, sells a few ice creams and does a few property deals!
And so we’re talking about the property market and different deals and it only turns out that he had been dealing direct with the owner of the property which I had been trying to buy through the estate agents. In fact, he had made an offer of £200k to the owner for the whole building which had been accepted (this was versus the estate agent not even entertaining me trying an offer below £330k!). Well I was gob smacked… as it then turned out the owner had accepted the offer for £200k cash (which at that time the whole building was being marketed by an estate agent for approx £400k).
But the story continues, as after the vendor accepted his offer, the next day the vendor calls the ice cream man/ investor and claims he has been offered another £10k and would ice cream man/ investor increase his offer. The ice cream man/ investor agrees to give another £5k – so the the total price was going to be £215k for the whole building – still an absolute bargain. Then just as the call is about to end the owner says there is a “condition” to the price being agreed – that condition is that £40k is paid to his solicitors account as a non-refundable deposit if the property did not proceed. Ice cream man/ investor laughs and says “Listen, we’re not talking about £4 or 5,000 here – you’re talking £40,000 non refundable deposit. That’s ridiculous and I am not prepared to do that. I’ll give you £5,000 non-refundable deposit but no more” The building owner was not happy and refused to do the deal. That was two weeks ago.
In the meantime – the other party who had increased their cash offer then reneges on the extra and the building got sold last week to a local builder for just £205k! So this building which was advertised with agents for a total price of £400k – the agents who would not entertain my discussion of an offer below £330k…actually lost their sale as the owner sold it direct for £205k. The moral of the story – deal direct!
Sue Maxwell Smith
I would report the agent to his trade body! I think you will find that an agent MUST put forward ALL offers to the vendor. I suspect he was the end buyer.
Ruth Johnson
I agree that sometimes the negotiator working for the agency needs to be more hungry for the deal. They need to get further negotiation out of both parties, to come to the best mutual price.
However, dealing direct is not always the best option for the average, non multi-million pound buyer
a: the agent gets involved in many more aspects of a sale than simply agreeing an asking price (some would argue this is just the staring point of a sale)Let’s not forget how you may have found out about the sale of the unit initially. Potentially through marketing and maybe even through Rightmove? All with cost implications
b: the price you offered was quite a way off the agreed final selling price – £130k is a massive drop from £400k or even £205k. Agreed, the agent could have been more pro-active to establish what your final offer was.
c: you can’t always guarantee you will bump into an ice cream man in the street who will give you all of this background information!
Equally you can’t assume the owner wants to deal direct with a buyer – they may want a professional agency working as mediator to the negotiations and also to provide access to thousands of potential buyers/investors. They equally can’t guarantee an investor will bump into an ice cream man by chance!!!
Although it’s a lovely ideal to do away with the agent (and the fees charged for providing a service) it’s not for everyone and agencies still play a vital role in the sale process, even in the age of digital marketing.
Sam
Hi Ruth, thanks for your comments. Just to clarify – my offer of £130k was just for the 2 flats. In terms of what I would have offered for the entire building I was thinking more along the 280k mark – still substantially more than what it sold for just a few weeks later (£205k)
I agree that it’s not everyday you would bump into an ice cream man, him turn out to be a multi million pound property guru and find out the background of the story! I guess what interested me about this whole episode was that a building I wanted – and would have paid much more for, than what it actually sold for – got stuck in the machinations of the estate agent doing his job.
To be honest, I am truly stunned what it sold for – and as a developer who is always looking for a bargain that doesn’t happen that often – especially when the building is a good size and in a decent location!
However, what I think this story shows is that when you deal with someone direct, you understand more what it is that makes them tick – what they want out of it. Perhaps on this occasion that communication got lost with the agent. Maybe they were trying to get the best price – but I get the feeling the owner just wanted the building sold as quickly as possible to the fastest possible cash buyer.
Sue – on many occasions I have come across agents who are just blatantly obstructive in terms of trying to get into view properties and secure properties because they have a gang of people who all the best deals go to. That’s why I really don’t like dealing with agents as unless you’re in with them (and that takes a lot of deals and money to get to that stage) then they look after their best customers first. Hence, why I tend to buy at auction – I have built up a good reputation with several auction houses who know I am good to deal with.
Johnny Debt
I think it is always worth dealing direct, if only to make sure that the vendor has the full picture.
rich greenland
The fact the vendor wanted £40K up-front and non-returnable would ring alarm bells for me. That there was something wrong concealed somewhere in the building, its history or title, and the vendor knew it, and knew that anyone buying it might find out too. Maybe the buyer didn’t get such a good deal after all.
I know from first-hand exactly what you mean about EAs shutting you out of deals unless you are the local favourite. That’s why I’m looking for stuff that no one else wants to touch.
Stan Smith
Entrepreneurial ice-cream men eh? I saw a TV report about Duncan Bannatyne [one of the Dragons] who apparently started his career this way. Way to go!
I would almost always wish to deal direct with the vendor but I echo earlier comments around the marketing/awareness nearly always originating with agents or via aggregator websites.
I have been looking for a barn project in Yorkshire for better part of a decade and found word-of-mouth to be ‘king’ when it comes to property intelligence. I know a local and well-respected architect who specializes in rural conversions of this kind and he knows farmers who may sell their barns to the ‘right’ people and without the need for agents. Currently biding my time before pouncing like a ninja into the right property deal at the right time, free from the evil and twisted agents!
Might I take this opportunity to wish all the property developers good luck as we pull out of the economic abyss –and that opportunities abound for everyone who eats/breathes/sleeps and loves property. As Dolf de Roos once said: Remember, The Deal of the Decade comes along about once a week…
Sam
Stan, thank you for your comments and words of encouragement!
Now I am dealing with commercial I have realised increasingly so that deals are sold more between people than agents. I have been spending more time identifying the areas I want to buy and then spending time building up personal relationships with people. It takes much longer (as a personal investment of time) than scouring Rightmove, Zoopla etc, but arguably it is far more enjoyable!
Jim Zoliath
It’s a tough market right now for both commercial and residential real estate. Obviously the best strategy is to “buy low” and “sell high”; the hard part now is the “selling high” part. Given the state of the market, I think potential buyers/investors should heed your words and buy direct for optimal deals when it comes to property purchasing and investing.
Residential Property in Bhiwadi
Forget Real estate agents direct deal for you property that Line or slogan is repeated by the Real estate developers or marketers. Because they use internet as marketer and make in house marketing team. They to do all tasks which perform by agent or a broker. They want to replace their brokerage money into their marketing Funds. How much they got success in this trick that prove by time. We can wait and watch.