Developers are known for spending big money on properties because they know what they want and how much value they can get from the right location. In order to make their proposal work through, they may need to pick up a number of sales in the same location in order to bring it all together. After all, vacant land can be hard to come by. If you have suitable land, it might be exciting, even overwhelming to have developers knock on your door, wanting to buy you out.

Then comes the gidding reality, how exactly do you go about this, what’s a fair offer and what are the reasonable requests you can make?

To answer some of those questions and help get your set up to be part of a winning deal, here a few steps to follow:

1. Research your land value

When it comes to determining the value of your land it’s best to assess what other properties the same size and location as yours have sold for in the past six months. 

This is what real estate agents will do if you ask them for a property price appraisal. It’s well worth doing both and comparing the numbers to see how close they are and asking for clarification on any differences you notice. 

This will give you an idea of what is a realistic asking price, based on what others have recently spent on similar properties for residential sales. A developer will usually be willing to offer a much higher price than this, as they expect to make a greater profit after the building completion and sale to multiple new owners and occupiers.

2. Know what your profit will be

By knowing what the price would be if you went on the regular market, you can gauge how much bigger the developer offer is and if it makes moving on, or giving up your own plans for the property or land, worth it.

It’s worth researching other properties you might buy if you move on, to see if there is a big enough profit margin to buy what you need, to cover the costs of completing paperwork, bank fees, and conveyancing as well as moving costs and your time if need be.

3. Understand the best way to invest

If you are looking for an investment, or the property in question was for investment anyway, there is also an option to partner with the developer for profit. It means you pass your land over to the developer to construct on it, then sell it together with them once completed and take a chunk of the profit.

You do this by offering the land to a developer as a collateral deposit (the developer might also put this deal down on the table from the outset).

While it can be an incredible way to gain a lot of additional profit on your property, this is really only suitable for vendors who:

• Are okay to wait a while to see returns (even years)
• Have the funds available to take a big risk (don’t take this offer if this is all you have to fall back on)
• Understand commercial investment or have experience in selling investment or commercial property
  

You do need to be mindful as this deal won’t pay off until the building is fully completed and ready for sale. There is so much that needs to be done in the interim, from local zoning approvals, foundations and blueprints working out as planned, right through on time and available materials. If the developer pulls out, goes bankrupt or isn’t able to pass building approval standards, you won’t see a cent, or will have to get in line and pay court fees trying to salvage something from your fated investment.

This is not to say that it will go badly, it can work out very well, but it’s only recommended for people who have the money available to work with. In the situation where you are selling your home, then assess if selling the property to them directly is profitable for you and work at that level the sale.

4. Know your rights

Read over the contract details carefully and get a second opinion from a qualified conveyancer or legal representative before you sign.

It’s important to check to see if the developer already has council approval. If not, even a standard property transfer may take months or years to complete. 

If the developer has already obtained approval from the council and zoning has been completed then you can see the sale done in the usual settlement time (60 days).

Another offer they may make is to enact a 60-day due diligence period. Meaning they can get experts in to assess the site for construction suitability, and call off the deal if there is anything preventing the build from going ahead.

If the sale is offered through a regular real estate agent you’ll need to fill in a Form 6 agreement with your local council in order to make that exchange legal (unless the developer is going to pay fees to the agent, in which case the form is not needed).

5. Get help and advice

Take your time. You don’t need to feel pressured into tight turnaround times that leave you in the lurch. 

Even if you are experienced in selling it’s still important to get the right advice and assistance to hand over or lease your property. Considering the profits you are looking to make from this deal, it's well worth investing in high-quality and experienced conveyancers who can back you up and look after your assets so you get the right result.

Pay full price for quality assistance from conveyancers and accounting, tax and property experts. 

Another great source to get assistance is a selling agent that has a lot of experience with developer builds and selling land to developers.

Checking in with your local council will get you some great information on where the developer is currently sitting with documents and what the design guidelines are for that council zone. They should be equipped to help people in your exact situation so ask who the right person to talk to is and see if they have any literature or downloads for land redevelopment options and planning.

Most councils now offer online access to resources, such as a planning portal.

If you were planning to sell anyway, selling to a developer couldn’t be easier. You don’t have to spend time and money on upgrading or repairing your property for display, you don’t have real estate expenses of advertising and marketing and you will get significantly more than the standard market value for your property.

If you were not planning to move then the decision will be a bigger one that requires a lot more careful thought and forward planning. Either way, your conveyancer will be key to helping you make an informed choice about whether the contract is a good fit for you.

As always with property, take the emotion out of the equation, switch into business mode, sit down with an accurate budget to determine exactly where you stand now, and what your future will look like if you go ahead.