Development Finance

This post was written early 2004. At this point I was going through the acquisition stage for a medium sized public house with the intention of converting to flats, the difference being that instead of demolishing the existing building, I planned to restore the original facade of the pub and create luxury internal flats with a victorian theme. The build cost would be higher but a good fit with my experience. This plan was in response to the growing opinion at the time that there were too many 'glass and steel' new builds. My opinion is that anything that deviates from the norm in property achieves a premium.

So here's a quick summary of whats going on with this deal... in list format

There are 8 players;

1. Me, the developer.

2. My solicitor

3. RBS

4. The surveyor

5. The agent

6. The vendor

7. The vendors solicitor

8. The vendors other buyers

There are many players and many motives here but I've grouped them through loyalties. My solicitor is obviously working for me but there is a 0.001% chance that he will run off with funding. True - it has been known to happen. This is amplified if the solicitor is a sole practitioner, which my firm was but i didn't know till i had progressed too far down the deal. You don't really want your solicitor to be a sole practitioner, banks will not send big money to sole practitioners. Find out if your solicitor is a sole practitioner and if he is, bin him and find another one.

Some tell tale signs of dodgy sole practitioners; 

- small offices
- based out in the middle of nowhere
- very disorganised
- very fussy over fees
- very cheap

In a word, don't use a sole practitioner. But if you do, like I did then they will have another firm that they use, unnecessary hassle.

If your starting out, find and build good relationships with a capable solicitor.

RBS

So, RBS is on my side at this stage, my side as in they will let the estate agent know that finance is available who will in turn calm the vendor down, in reality RBS is waiting for the surveyor to be paid for at which point they will have you up against a wall. Be aware. I should also point out that in this case the estate agent was a complete clown. If you come across an incompetent estate agent, walk away from the deal. Regardless of how good the deal looks.

Incompetent agents will end up costing you money, when this deal didn't work out I was down to the tune of about £7K.

Solicitor

At this stage I have also committed to paying the solicitor, believe it or not you can get the solicitor to do some work for you (field a call or two from an idiotic estate agent) and pay them when you are absolutely sure that you want the deal.

Vendors Solicitor

Solicitors are basically pit bulls on leashes, and a good property solicitor will be able to tell the other side to behave - in no uncertain terms how. It pays to have an experienced property solicitor who will be able to do this and who doesn't charge by the letter.

Surveyor

You should also be very wary of dodgy surveyors - at best they get paid for copy and pasting reports at worst they persuade a bank to give you unfavourable terms in the finance package and then pass on the deal to their preferred developer (ie someone who gives them a backhander). Sad but true. End of.

Vendor

Vendor in this case was being unreasonable. But fair play to him he was very worried about the market bottoming out, didn't have a clue what he was doing and thought he could bully his way through the situation. In the end he sold the deal to another developer, which was a sad day for that street, the east end, the building itself and the community. But he got his money, so fair play.

The Estate Agent

A experienced agent translates as money saved. If the agent at any point displays any incompetence be sure to walk away from the deal - hard to do sometimes but best in the long run.