Financial hit when aborting an incomplete build.

[epsilonGreedy]

Before I commit it would be good to hear views on the financial hit when aborting an incomplete self build by selling it on as-is.

 

Given a desirable easy plot, middle of the road design and all paperwork in place for interim quality inspections my hunch is that the following would be the least costly stages to abort.

 

1. Foundations dug & concrete poured.
2. As per (1) + All services connected apart from telecom.
3. + Foundation blockwork raised to DPC.
4. + Walls, roof and windows i.e. weather tight shell.
5. + Final build control sign-off but missing kitchen, decorating, finished driveway, garage and garden.

 

Conversely would I be right in thinking an incomplete build on the market at the following stages would be unattractive.

 

1. Plot untouched with less than 9 months to expiry of PP.
2. Brickwork to roof height but no roof and signs of wet structure.
3. Weather tight shell but no services connected to site.
4. Weather tight shell with incomplete mix of 1st/2nd stage work in progress.

 

[Edit: for complete change of view]

 

Factoring in advice below I can now see that a self build should only start once funds and trades are lined up to get the build to the stage of weather tight shell. Prior to breaking ground the best incremental step to take would be to connect services with water being the top priority.

Edited February 1, 2018 by epsilonGreedy
Update or views expressed below.

[ToughButterCup]

3 minutes ago, epsilonGreedy said:

Before I commit it would be good to hear views on the financial hit when aborting an incomplete self build by selling it on as-is.

[...]

 

Hit to whom? The seller or the potential buyer?

 

5 minutes ago, epsilonGreedy said:

[...]

1. Plot untouched with less than 9 months to expiry of PP.

[...]

 

Do you mean the last 9 months of the 12 year rule? (i.e.  permission was given 11 years 3 months ago) 

[epsilonGreedy]

2 minutes ago, recoveringacademic said:

Do you mean the last 9 months of the 12 year rule? (i.e.  permission was given 11 years 3 months ago) 

 

I meant the 3 year PP limit that would expire if zero build work is evident.

 

4 minutes ago, recoveringacademic said:

Hit to whom? The seller or the potential buyer?

 

Me the seller if I had to sell a part complete self build.

 

For example:

 

Take a theoretical completed self build property expected to be worth £250k.

 

With £100k spent on the plot plus industry standard costs spent on foundations and brickwork to roof height, would I get my money back when selling such an aborted property?

[ProDave]

The planning can be locked in once you have "started" the development. there is then usually no rime limit on completing it.

 

What constitutes "starting" will be individual to each site, but in our case we had a planning condition that the entrance to the site must be formed prior to building work started. I had a letter confirming that once I had created that entrance, the development had "started" so If I wanted to bail out,  I could have sold it then with no fear of the planning lapsing.

 

I suspect in any scenario where you are selling a part built house, you would be lucky if the sale price recovered the plot price plus what you had spent.

[ragg987]

If I were a prospective buyer, here is how I might feel:

 

Plot untouched but PP granted: Great opportunity as principle of new-build is established and I could either take it as-is or put in a new application to add my personal touch. PP lapsing becomes an issue only I wanted to build as-is.

 

Build started and no structure to show: procced with caution "why is he selling what is wrong with it?". If the design struck a chord might view it as an opportunity.

 

Weather-tight and BC inspected to date: quite appealing if design is right as I can personalise the innards and external finishes to a degree as well as short-cut the new-build process.

 

One other factor - how would the buyer finance this purchase? Would a mortgage company entertain it? This might become the deal-breaker unless your buyer is a builder looking to complete it and make a profit. In which case you will be losing money.

 

9 minutes ago, ProDave said:

I suspect in ant scenareo where you are selling a part built house, you would be lucky if the sale price recovered the plot price plus what you had spent.

+1 to the ants

[Temp]

57 minutes ago, epsilonGreedy said:

Before I commit it would be good to hear views on the financial hit when aborting an incomplete self build by selling it on as-is.

 

I think the main problem is that any buyer would know that the sale was a forced sale and so would know they are in a strong bargaining position.

 

[ToughButterCup]

1 minute ago, Temp said:

I think the main problem is that any buyer would know that the sale was a forced sale and so would know they are in a strong bargaining position.

 

But in our case, that assumption would have been wrong . An exception to reaffirm your rule, mabe?

[RichS]

I would say if you're already thinking along these lines that your heart isn't really in it.

Pull out now and save yourself lots of grief.

[SteamyTea]

9 minutes ago, RichS said:

I would say if you're already thinking along these lines that your heart isn't really in it.

Pull out now and save yourself lots of grief.

Or you are an accountant/serial bankrupt are are planning the 'exit' strategy.

[Dudda]

When someone is getting into financial trouble they tend to cut corners. Not saying you would be just saying how it is.  From experience if only foundations are done it’s very hard to get a new builder or structural engineer to sign off on them. Had this happen during the recession after a few builders on sites went into bankruptcy. Any structural cracks on competition of the building and they’ll blame the original foundations by others. Far better to dig them out and start again. Therefore a green field site with planning would be better than a site with foundations to a potential buyer.

 

If selling it’s going to be sitting a long time while getting surveyed, finances, legal maps, transferred, etc. You really need it weather tight (sold like an office shell and core ready for fit-out) or green field to get the best return. 

[Ferdinand]

I would say the amount it is complete minus about 20-30% of the total project budget, subject to provable build quality and adjusted downward by X depending on desperation of seller.

 

ie Seller will be taking a financial bath almost regardless.

 

I cannot see this being affected by makes conditions, but perhaps southern self-builders know betterr on that point.

Edited January 31, 2018 by Ferdinand

[Nickfromwales]

3 hours ago, ragg987 said:

Weather-tight and BC inspected to date: quite appealing if design is right as I can personalise the innards and external finishes to a degree as well as short-cut the new-build process.

Definitely the sweet spot. No more diggers, just add the pretty bits. 

[lizzie]

Developers sell small sites on to each other privately all the time single plots or 2 or 3 house plots. Each time there is usually a small uplift, not much often just enough to make it a zero cost thing. There is nothing wrong with the plots it may just be they have banked them into their landbanks and need to move them on to release cash or whatever. It would be very unusual for one to sell on having started work it is more effective to build it out quickly and move it on. They rarely sell on to an individual, plots that individuals buy have usually had a once over by a developer at some stage and rejected before being offerd to the self build market. That tells you what they think about margins.

 

If I saw a plot for sale that had work started I would immediately think the owner needed to get out of it and needed the cash pdq, why else would you start work and walk away. I would be very reluctant to buy a plot with things started other than perhaps services to the site (can be expensive), I wouldnt buy a self builders plot with foundations they had put down too much unknown and limiting.

 

If you don’t think you will build it either buy it and try to sell it on into the private/self build market (profit unlikely) or walk away now. If you do start it do the whole build and sell it on (profit only likely if you can run the thing like a developer and keep the margin, unusual for a self builder). 

 

I think you need to be absolutely commited to your build to go into it. Whichever build route you take there will be guaranteed heartache and worry and sleepless nights. The reward at the end is your very own house built with love and blood and sweat and tears. If you cant see yourself doing this then walk away now would be my advice.

 

 

[epsilonGreedy]

This has been informative and the advice now banked, thank you.

 

When starting this thread I was focused only on material deterioration due to weathering if a build halts for + 1 year. On the other side there is theoretical financial increase in the value of a plot as it develops. For example foundation costs might vary between £6K and £10k, and so if completed for £6k the value enhancement to a plot should be £ 6 + 1K because a random £4k factor has been eliminated. The same could apply to completed service connections.

 

That  was my thinking when I started this thread, however I now realize I overlooked market factors and human aspiration.

 

If say 1 in 1,000 shoppers for a home would consider an untouched plot with outline planning permission the ratio might fall to 1 in 4000 once foundations are filled because self build buyers would be shackled to another's design dream with its detailed PP.

 

I can now see that aborting before a weather tight shell is reached would incur a big financial hit. Once a building looks complete externally I guess the number of potential buyers jumps, let's say to 50 in 1,000 because the incomplete property would start temping those not focused on a self build mission. I take the point that prior to final building control signoff, mortgage problems will limit the market size.

[ProDave]

Just to add another perspective.

 

If you hit financial issues run out of money, don't just throw in the towel and give up.

 

We were banking on the sale of out old house to complete the new one, but that never happened.  As soon as I realised that was unlikely to happen I laid off the builder (amicably I am glad to say). Since then I have been doing all the work myself, to make what remained of the pot go as far as possible without spending it paying for labour.  We are now down to just spending as we earn though some more funds should become available soon.

 

The end result is the new house will have cost a lot less, but taken a lot longer, and when the old house eventually sells we will be better off.

[epsilonGreedy]

21 hours ago, RichS said:

I would say if you're already thinking along these lines that your heart isn't really in it.

Pull out now and save yourself lots of grief.

 

Nothing to do with motivation just the problem of a fine financial balancing act.

 

Even NASA planned for failure in its Apollo moonshot .

[Ferdinand]

One final thought is would I buy one of the houses I have seen built here?

 

The answer is some. I would buy Grosey's because it is relatively simple. I would not buy Jeremy's, because while superb it is also far more complicated than I would care to take on ... and that is an artefact of Jeremy's technical guiding knowledge and skill set being far deeper than mine in areas that relate to the particular house.

 

For me such a house would be too complex to live in.