Most people assume they have to go it alone when selling a property. Sure, you have professionals to help you, but it seems like an individual process. That may not be the case anymore thanks to aggregation selling.
Every seller wants to achieve the best possible price for their property. They’ll make all sorts of efforts to do that. From simple home improvements to massive renovations, it all adds to the value.
But that’s if you’re selling down the traditional route. You want to attract a buyer who will live in the property. As a result, you need to make the property as nice to live in as you can.
Then there’s the non-traditional route. Some sellers don’t try to sell to residential buyers. Instead, they sell their land to property developers.
This opens up a whole new avenue when it comes to valuation. It’s not just the property that determines the value of the transaction in these cases. The land, and the potential it holds for development, also has value.
But it’s not always possible to sell an individual property. The block of land may not be large enough to appeal to property developers.
That’s why many Australians have decided to team up when selling to a property developer. This is exactly what the residents of Castle Hill have done, and it’s allowed them to create an offering that’s attractive to any developer.
Banding Together
The residents of Castle Hill found themselves with a bit of a dilemma.
They recognised that their land held potential for property developers. However, selling as individuals wasn’t viable. Zoning restrictions held many of the residents back. The most that many could offer was land that’s suitable for medium-density construction. That limited the number of property developers that they could appeal to.
Eventually, the residents got together to discuss alternatives. They decided that they could use the concept of aggregation selling to their advantage.
Aggregation selling is when a developer tries to buy several properties in the same area from multiple sellers. The idea is to buy enough property to create one large block, which presents more opportunities for development.
The sellers decide to take things into their own hands. Instead of waiting for the developers to come calling, they put together a package that they hope will entice buyers.
All told, 90 residents of Castle Hill have gotten in on the group act. Collectively, they’re offering a 9-hectare block of land that’s primed for development.
Some estimates state that a savvy developer could fit 2,000 units onto the block. That’s because selling in this manner changes the zoning laws that relates to the sellers’ land. This “superblock” becomes eligible for high-rise building. That attracts an entirely new set of potential buyers.
Early estimates say that the group could achieve $350 million for the collective sale. That works out to over $3.8 million per person.
The “superblock” represents a huge opportunity to both sellers and property developers. Naturally, there are other groups who’ve gotten in on the act.
Are Others Doing It?
The residents of Castle Hill may offer one of the largest “superblocks” around. But they’re not the only group of residents who’ve decided to band together to achieve a sale.
Stuart Cox, who serves as Savills Sydney’s Residential Site Sale Director, offers more insight.
He says: “Over the last couple of years we have undertaken six amalgamated sites across the Sydney metropolitan area with the majority for sale being for five to 10 dwellings, which is a manageable size.”
He then adds an important point. “Owners can come away with two to three times the current market value,” he says.
A group of nine people in the Melbourne suburb of Cheltenham achieved such a result. After joining forces, they sold their properties for a collective $9 million.
Another group in Frenchs Forest, Sydney, are currently asking for $200 million for 62 plots of land. And in Castle Hill, a different group of 25 people hope to achieve $100 million for a sale.
Simply put, there’s a lot of potential in teaming up to sell to property developers.
Moreover, having several groups using the same tactic sets a precedent. More property developers will expect to be able to buy blocks of land from groups. As a result, the tactic will become even more accepted.
Perhaps aggregation selling will become more important as the population increases. Developers may use it to work on previously unviable land.
The Benefits of Selling as a Group
So, what can sellers hope to achieve if they sell as a group? There must be plenty of benefits on offer, otherwise the tactic wouldn’t have caught on as it has.
This article touches on some of the benefits above. But let’s now take a deeper look at some of the reasons why you might want to use the aggregation play to your advantage.
Benefit #1 – Achieving a Higher Sale Price
As you may have guessed, a higher sale price plays a big role in the group selling decision. The $3.8 million per person figure for the 90 Castle Hill residents shows that it’s possible. Even with Sydney’s high prices, that’s likely more than each individual seller could achieve on their own.
In fact, selling as a part of a group could raise the price that you command by between 20% and 60%.
Benefit #2 – Creating New Zoning
This is an issue that many residents in the Castle Hill group experienced. Their properties weren’t quite large enough to attract developer interest on their own. At best, they’d allow for medium-density housing. But their lack of size created zoning restrictions.
These restrictions prevented larger property developers from taking an interest.
But by banding together, the residents could essentially create new zoning. They offer a much larger block of land as a collective. This block can meet zoning requirements for much larger buildings, such as high-rise apartment blocks.
Different zoning means new opportunities. Developers take an interest because these zoning changes create new opportunities.
Benefit #3 – Collective Knowledge
Unless you’re in the property sector yourself, you likely don’t have a lot of knowledge about selling a property. You may have done it in the traditional fashion once or twice. But that’s not enough to maximise your profits.
By working in a group, you’re collecting knowledge from many other people. In the case of the Castle Hill group, there are 90 people who can provide input. Many of these people will have knowledge that others in the group don’t have. Some may also have access to professionals who can help with the sale.
Benefit #4 – You Make it Easier for Developers
The traditional aggregation play looks a little different to this new version that’s arising. With the old play, developers would try to buy from each property owner individually.
Let’s look at the Castle Hill example again. That would mean a developer has to deal with 90 separate transactions to get the block of land that’s on offer. That’s 90 separate negotiations. If something goes wrong with any of them, it may change the developer’s plans.
By working as a group, you create a single entity for the developer to deal with. This also means that there’s a single transaction and only one entity to negotiate with.
Making things easier on developers means fewer mistakes get made. Plus, it’s easier for the developer to communicate and they’re more available than they would be when working with 90 people.
Benefit #5 – Taking Advantage of Your Land Value
Many people only see the property itself as having value. They don’t think all that much about the land that it’s built on.
And when you’re selling as an individual, the land may not have much value. The zoning restrictions mentioned above can put paid to that.
But by combining your land with others, you unlock its potential. A single property block may not be of interest. But several blocks located next to each other may have a value that far exceeds the properties on the land.
This is a good thing for those with properties that perhaps aren’t as valuable as they could be. If you’re struggling to sell the property, you could use this technique to unlock the land’s value instead.
The Downsides
All of this makes selling as a group sound very attractive. But you can’t rush into the decision without doing some due diligence. There are some potential downsides that could affect your group.
Stuart Cox expresses one issue that he’s seen with the Castle Hill group. What they’ve put together, it’s too big – it would be better off in smaller chunks,” he says.
“You’re really limiting the buyer pool when it comes to a site of that scale. It’s almost unsellable.”
“Unsellable” may be too strong a term to use in this case. But there’s an important point here. Your land can appeal to property developers of all sizes. Trying to create the largest block possible may seem like a good idea at first. But it means that many smaller developers have to drop out of the race.
Instead of trying to get as many people together as possible, it may be wiser to create small groups. If you do go for a large group, ensure that there’s enough demand among developers to make a sale likely.
There’s also the group dynamic to consider. It’s likely that the group will assign a leader or representative to handle its interests. That’s usually a good idea. But anybody who’s worked as part of a group before knows that conflicts can arise. If you don’t have a process for dealing with differing opinions, some people may leave the group. Such situations run counter to what you’re trying to achieve.
Small Tips for Raising Your Land’s Value
Selling as part of an aggregation play typically raises the value of your land. But there’s plenty that you can do to add a few dollars to your asking price. These techniques include the following:
- Ensure the land is suitable for major utilities, such as water and sewage. When you’re selling a property, this shouldn’t be a problem. But if you’re selling undeveloped land, you want to make it as accessible as possible to developers. You can speak to specialists to determine the development potential of your land when it comes to utilities. Any assurances that you can offer will improve a developer’s confidence.
- Improve the access to the land. Anything that you can do to make the land easily accessible makes it more attractive. Again, if you have a house that faces a street, this shouldn’t be a problem. But landowners may want to look into building roads or providing some other form of access to their land.
- Check your title to ensure you have full rights to the land. This is typically the case for homeowners. But it’s worth confirming before you head into a sale.
- Take care of the land. This applies whether you’re selling to a developer or residential buyer. Allowing the land to fall into disrepair makes it difficult to see the potential that it has. Clear any junk from your block and take care of any plants and turfed areas.
Carry out these actions and you’ll improve the value of your land further. If everybody in your group does the same thing, you may command an even higher asking price.
Final Word
Banding together to sell land is an increasingly popular strategy in the modern property market. Sellers can earn more for their properties with this technique. Plus, it makes things a lot easier for developers.
In recent years, we’ve seen more groups trying to use this technique. Many of them have achieved success.
You can too, but you may need help to get you there. That’s where Archistar can help. Our platform can help you to figure out the value of your land and what you can do to make it more valuable. It also highlights the development potential that your land has. In some cases, you may be able to use your results to bring a group of people together.
We’re here to help you increase the value of your property. Contact an Archistar Property consultant today to get started.
