QUICK GUIDE THE IMPACT OF MARKET FORCES

If at this point you’re thinking that options and conditional contracts are a great way to reduce risk in any self build project purchase, you would be right. Unfortunately, the other side of the coin is that they introduce delay and uncertainty for the vendor over when they’re going to get their money, or how much they’re going to get. So they won’t always be attractive.

Market conditions play an important part here. If a property is desirable and there are several likely purchasers lined up, anything other than a straightforward offer to buy is unlikely to prove acceptable.

Similar considerations apply where the market is rising and purchasers are more willing to shoulder some risk. Conversely, a problem site that’s hung about on the market for some time might be one that a vendor would be delighted to make progress on, even if the eventual completion is only going to come about in several months’ or even years’ time.

One thing to bear in mind is that, in a falling property market, an option enables value to be calculated at the time of purchase. A conditional contract, meanwhile, is likely to fix the price when the contract is signed, meaning a long delay could see you paying over the odds.

As with any investment, property involves some degree of risk, and different people have different attitudes and tolerances to this. If you’re risk averse, then options and conditional contracts can help you minimise the chances of things going wrong with your purchase. The downside is that in seeking an option or conditional contract, you risk losing out to another potential buyer who’s willing to pay an attractive price outright.