Legal advice for farmers: Auction is fast forwarded way to buy property
Buying property through an auctioneer in the traditional way cannot quite match the excitement of an auction.
In comparison to a private treaty sale, which can be drawn out over a long period, auction sales are usually concluded in a matter of minutes.
In effect, you bid on the property you want until you are the last and highest bidder.
This may sound quick and easy; however, there are certain pitfalls to watch out for.
It is a recommended practice to attend an auction as a spectator prior to becoming a bidder.
This will get you used to the language, rituals, and will hopefully prevent a rash impulsive buy.
It is extremely important that you do ample research prior to entering the auction.
This means visiting the desired property and doing sufficient investigations such as employing a surveyor to check for structural defects on buildings, and a solicitor to investigate title.
If the property has a defect, the bidder inherits this problem once the hammer falls, and the property is sold.
Immediately after the auction, the bidder will be asked to sign contracts and pay a non-refundable deposit.
To contrast this with a private treaty bidder’s process; the bidder would pay a refundable deposit, and sign contracts only after surveys and weeks of legal work are completed.
The auction system is a fast-forwarded process similar to a contract signing stage of a private treaty sale.
The auction room is now becoming the preferred method for purchasing distressed properties, some agricultural, land and property being sold through executor sales.
Conducting due diligence before buying is critical.
It is extremely important to be fully prepared, going into the auction.
Here is a general checklist that should be followed when considering purchasing a property at auction.
- Make sure you view the property at least once and possibly more than once at different times during the day, to establish a normal living day at that location.
- If you are buying as an investment opportunity, investigate the local rental values and test how much competition is in the market.
- Ensure you have adequate funds in place to include stamp duty and legal costs.
- Allow for the payment of a 10% deposit on auction day, and you will need to have your finance in place to complete the purchase.
- Investigate as to a possible reserve price or a maximum reserve at which the property will definitely be sold.
- Investigate any defects in the property by obtaining a detailed engineers report.
- Consult your solicitor concerning contract or ownership issues.
- Know the closing date whereby you will need to complete the transaction.
- Investigate the BER rating, if there are buildings on the property.
- Check whether the property is let, or ensure you will obtain vacant possession.
The costs involved in purchasing a property are substantial, and it is important you budget and allow for these costs, such as stamp duty and solicitor’s fees.
Stamp duty rates have significantly increased for non-residential property (which includes agricultural land) over the past number of years, with a rise again in October 2019, from 6% to 7.5%.
The Young Trained Farmer (YTF) Relief, and Consanguinity Relief, continue to apply.
YTF Relief is an exemption from stamp duty where a farmer under the age of 35 meets the qualifying conditions.
Consanguinity relief reduces the stamp duty rate from 7.5% to 1%, where the transfer of farmland is between certain blood relatives, and certain qualifying conditions are met.
Auctions are a great place to get a bargain or to secure a property quickly.
This can only be done successfully if all of these guidelines are followed.
