Selling your house to a property developer: how it works and what it pays

Selling your house to a property developer: how it works and what it pays

If you are thinking about selling your house to a property developer, you are usually not selling the home itself, but what can be built on that spot. That difference shapes the price, the conditions and the timing. In this article you will read when a developer becomes interested, how such a sale works in Belgium and how to weigh an offer against an ordinary sale through an estate agent.

Why a property developer is interested in your home

A property developer looks at your property differently from a family that wants to live there. They work backwards from the project they can build: how many flats or houses fit on the plot, what they will sell for and what demolition, construction and the permit will cost. What is left over is the price they can pay for your land.

That makes some properties particularly attractive. Think of an older house on a wide or deep plot, a house in a town centre where more storeys are allowed, a corner plot or a row of houses that together form a larger building block. The condition of the house often hardly matters, because it will be demolished or extensively rebuilt anyway.

That is also the difference with a cash buyer. A cash buyer buys quickly and as is, to renovate and resell, and therefore usually offers less than market value. You can read more in our article on selling your house to a cash buyer. A developer pays for the building potential, and in the right location that can exceed the value of the house as a home.

How does a sale to a developer work?

It often starts with a letter through the door or an approach from an estate agent who represents a developer. Sometimes a developer contacts several neighbours at once, because they can only build a project once they have acquired one continuous plot.

After a first conversation, a conditional offer usually follows. A developer wants certainty that they can build what they have in mind. That is why they rarely buy outright and instead work with:

• a sale agreement with a condition precedent: the sale only becomes final once the planning permit for the project has been granted;
• a purchase option: you give the developer the right to buy within a set period, often in return for a fee you keep if they walk away;
• a joint sale with the neighbours: each owner signs separately, but the sales depend on each other.

The mechanism resembles the familiar financing clause in an ordinary sale agreement. Our article on the condition precedent in the sale agreement explains how such a clause works and what to watch out for as a seller. With a developer it is not about a loan but about a permit, and that process usually takes much longer. Even after the sale agreement, the notarial deed remains mandatory: only then does ownership officially pass to the buyer.

The price: how do you assess an offer?

A developer's first offer is a starting point for negotiation, not a fixed price. To assess it, you need two figures.

The first is the market value of your home in an ordinary sale. That is your floor: an offer below it must bring another clear advantage, such as speed or not having to pay for renovation. A free valuation of your home quickly gives you a first idea.

The second is the value of the building potential. For that, look at what the zoning and local rules allow. The planning department of your municipality can tell you which plans apply to your plot. An estate agent who regularly works with developers will also know what has recently been paid per plot in your area.

Also look at what comes with the price. A higher offer with a long, open-ended permit period can be worth less than a slightly lower offer with a short period and a fee if the developer decides not to buy. Always ask how long you are bound and what happens if the permit is refused.

Risks and points of attention for the seller

The biggest uncertainty is time. As long as the condition precedent is running, your home is tied up. You cannot sell to anyone else, while the outcome remains uncertain. A permit application can be delayed by changes to the design, objections from neighbours or an appeal procedure.

So agree clearly on:

• a final date by which the condition must be met, after which you are free;
• who bears the cost of studies, plans and the application (normally the developer);
• whether you can stay in the house until the deed, and when you must hand it over empty;
• a fee or advance if the developer withdraws for reasons other than a refused permit.

Have the sale agreement or option agreement checked by your notary before you sign. As a seller you are entitled to your own notary, at no extra cost for the deed itself. The usual obligations of a sale still apply: think of the EPC, the electrical inspection and, in Flanders, the soil certificate. For the tax side, such as a possible tax on the capital gain, read our article on capital gains tax when selling a home.

Sell to a developer or through an estate agent?

A direct sale to the developer who approaches you seems simple. The drawback: you have only one buyer and therefore little insight into what others would offer. Often several developers are active in the same region and looking for land.

An estate agent can market your property in two ways: as a home for private buyers and as development land for developers. That shows you which route pays the most. They know the usual terms in such deals and negotiate on periods and fees, not just on price. Want to know which agents in your municipality have experience with this kind of sale? Through comparing estate agents you get free, no-obligation contact with up to three licensed estate agents.

If it is an undeveloped plot rather than a house, also read our article on selling a building plot as a private individual.

Frequently asked questions

Does a property developer pay more than a private buyer?

Sometimes, but not always. A developer pays for the building potential of the plot. Where much more can be built, that can exceed the value of the house. Where little extra is possible, they often offer less than a family that wants to live there.

What is a planning permit condition precedent?

It is a clause in the sale agreement that makes the sale final only if the buyer obtains a planning permit for their project. If the permit is not granted within the agreed period, the sale lapses and you are free again to sell to someone else.

Do I have to sell together with my neighbours?

That is not mandatory. A developer may propose a joint sale because they need a larger plot. Each owner decides for themselves and signs their own agreement. In that case, check whether your sale depends on your neighbours' sale.

Who pays the costs in a sale to a developer?

As with any sale, the buyer pays the registration duties and the deed costs. The costs of plans and the permit application normally lie with the developer. As the seller, you pay for the mandatory certificates and, where applicable, the estate agent's fee.

In conclusion

Selling your house to a property developer can be a good deal, provided you know what your plot is worth to a developer and what you give up in return in time and certainty. Always weigh an offer against the market value of your home, limit the duration of every condition and have the agreement checked. Want to know what your property is worth, or get advice from an estate agent with experience in development land? Compare up to three estate agents in your area for free.