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!