Contract to have first option to buy

[Sootygirl]

Hi Everyone,
My house is included on a 4 hectare parcel of land that is in the process of being rezoned from Urban Investigation to b6 enterprize corridor. Mine and 3 neighbours properties, comprise a small portion of that parcel. The rest is owned by a developer.
I received a visit {and several phone calls} from a developer {not the developer who owns the land being rezoned} wanting to know if I was interested in selling. I told him no, Ive been here for 30 years, like it here and my kids live nearby etc. He has contacted my 3neighbours also with a view to purchase. He ask me if I'd been contacted by anyone else.

He rang again today and wants to pay me to enter into a contract for 12 months to give him first rights to buy my property if I decide to sell.

He is ringing me again next week to get my answer. I will not have time by then to visit a solicitor but would like to be a bit more informed about how these contracts work when I next speak to him.

My concerns are: If I do enter into this contract, do I have to state a selling price?
Are these contracts advisable? Is there a downside?

Thanks to any insight you can give me.

 

[wylie]

What is in it for you to sign such a contract, locking you in to this developer (whether or not a price is stated). Unless there is something tangible in it for you, wouldn't you be better served to just say "no" and see what happens.

If you do decide to sell, you may then do better with two or more developers wanting your block. You might get a better price if there is competition.

 

[Terry_w]

Be very careful.

There are different ways this could be structured. If you sign something without getting advice you may find that you are locked in to selling.

These are generally called option agreements. Usually the purchase of the option (ie the developer in this case) will want an option to purchase for x within y.

X has to be defined somehow, but it doesn't have to be a figure now. It could be defined as the average of 2 valuations by licenced valuers for example.

Y could be a fixed date or a broader date such as within 30 days of giving notice to you.

The option is generally his. ie he decides if he wants to buy and if so you must sell. But it doesn't have to be this way. It could be structured so that if you decide to sell then you must sell it to him. This is called something like the option of first refusal.

 

[RPI]

What TerryW said. Be very careful and get advice.

 

[Sootygirl]

Thankyou so much for your replies! Wylie, he has offered to pay me {$5oo for the first 3 months then $1000} so that is his sweetener and the only gain for me if I did this.
Rezoning is not finalized, it is currently with Planning & Infrastructure? I guess this guy is wanting to lock us in before someone else does?
Since I don't want to sell, I will tell him no. *If* down the track, someone makes me an offer that I cant refuse e.g. that more than compensates for the major hasstle of finding another place as good as this one in the area - the MAJOR hasstle that moving involves and the devestation of seeing my beautiful house bulldozed, I will let him know.
I wish I was 30 again! Dealing with change would be easier!

Thanks again!

 

[DaveM]

he has offered to pay me {$5oo for the first 3 months then $1000}

The issue for me is, why would you want to lock yourself in to one buyer now for a measly $1500 when you could have 2 or more developers wanting to purchase after the rezoning is done.

Unless he is willing to add some zero's to his figure, I would tell him politely that right now you have no intention to sell, but in the future if you do you will contact him.

 

[wylie]

If there are no hidden clauses, as TerryW has mentioned could be lurking in the fine print, then I would not sign up for a measly $1500. As Dave says, tell him you will call him if you decide to sell, but maybe also mention that your block may be of interest to other developers. A big hint to him that you would sell at the "right" price might see him think he'd best offer more.

You did say you would move for the right price, but I think developers are looking at their bottom line. We have a big block that can be developed, and I've always thought we would be beating off the developers with a stick once land becomes more scarce. Of course, that isn't happening, and developers will be wanting our block for as cheap as they can get it, if they ever want it.

(I want more money due to a large double block with two street access. Developers no doubt want to pay only $xx per townhouse or house and will not pay a cent more because it will affect their profit.)

 

[Terry_w]

Yes $1500 is way too low. try for around 2% of the property value. This developer must have done a rick otten course or something.

 

[Sootygirl]

After the phone conversation with him, {which caught me off guard and with baby grandson tugging at my leg}, I thought that the contract he wants meant that we would sell to him ONLY if we decided to sell at all. After a google search, I now realize that the contract would lock us in to sell {if he wants to buy}.
I wont be going there!
The area to be rezoned has been identified by Dept of Planning and Infrastructure as ''suitable for redevelopement as a support precinct to Wyong Hospital''. {Hospital is across one of the boundry roads}. What sort of ROE a developer could expect, I have no idea. I guess I will find out soon enough!

Thanks again for your advise and yes, I will tell him that if I do decide to sell at some point, I will let him know.

 

[Terry_w]

Why not just ask him to send you the contracts and you will go over them and then just see what he is up to