People buy land for many reasons. Some treat it as a safe investment. Others, having built up equity in a family home, might want to acquire land for a new-build house to suit their lifestyle.
Others buy land to gift to their children to give them the chance to build a home. And developers are always interested in plots they can redevelop into flats or houses.
Or maybe you’ve just spotted something different. Unique opportunities arise at auction that wouldn’t usually go through traditional estate agent channels.
If you’ve wondered how to buy land at auction the key to success, like many things in life, is preparation.
Where to start?
There is a broad range of places to hunt for the land you need.
Most auction houses put their catalogues online, and you can join their mailing lists to stay informed.
Keep an eye on property supplements in regional and local papers or just remain in touch with estate agents to learn what might be coming up in the areas you are looking at.
You should be clear in your mind about the area and type of opportunity you are searching for. It is sometimes easy to get carried away with options that don’t quite fit with what you have in mind. It is better to spend longer to pick up the right plot than to make a quick purchase of something that is not exactly what you want.
When you find a plot that interests you, the next step is to talk to a specialist consultant (such as ourselves) about the likelihood and desirability of what you have in mind.
An initial desktop study will help you considerably and remove the need to make unnecessary site visits. Put together a spreadsheet that includes the area you are searching for; the size of the plot; and type of opportunity.
Use the spreadsheet to keep a running list of possible sites as you find them. Make notes of the position regarding planning permission status; when it is likely to go to auction; and any concerns or pitfalls you can see, so that all the research is complete before you arrive at the auction.
Keep an open mind when buying land. This might mean buying a property that could be demolished and rebuilt, or that has a large garden where a new home could be positioned, and the original property sold on.
Time to prepare
There are some other essentials you must undertake before you get anywhere near the auction room.
- View the plot before the auction. If you are considering something that could be demolished and rebuilt, arrange for a surveyor to take a look at the land or property.
- Get your solicitor to review the legal documents. Ensure the information is up to date, the searches are correct, and there are no restrictive covenants or constraints. Arrange for your solicitor to talk to the vendor’s solicitors to deal with any queries.
- You must have your finances in place. If you are successful with your bid, you will be exchanging contracts when the hammer goes down. Cleared funds need to be agreed with your lender in advance for completion, typically 14 days later, so the money is available.
Some pieces of land might be sold without planning approvals in place. Plots like this carry a risk and are often sold on an “as seen” basis. If you are offered land like this, always get independent advice first.
The purchase procedure
The process of buying land is very similar to the purchase of a house. The difference is that all the legal, financial and professional research is done upfront, so contracts are exchanged at the moment your bid wins.
Legal fees, the financial offer from your lender, mortgage take-up fees and stamp duty will all apply in the usual way. Some of this cost is front-loaded before you get to the auction, as you are doing all your research and arranging finance before the purchase.
It is possible to make a bid for a plot before the auction. Some vendors will consider withdrawing a plot from sale if they receive an unconditional bid with cleared funds that is acceptable to them.
On the day of the auction you can bid in person, over the telephone or through a negotiating agent. One of the best tips, if you go without an agent, is to sit or stand at the rear of the room so you can see what other bids are being made. Don’t jump in first, let things move along and ensure there are genuine bids being placed.
Sometimes an auctioneer will take bids from the room to keep it moving along. But if a plot fails to reach its reserve price it will be withdrawn from the auction.
It is normal for a potential bidder to register at the auction venue on the day. Due to money laundering regulations you will need your identification and proof of address. Registering speeds up the process if you are successful when bidding later in the day.
Setting a budget
If you are buying a piece of land to build a house for yourself, perhaps you won’t be too concerned about turning a profit. But you should ensure you cover all your costs. These include the price of buying the land, the relevant professional fees, the construction of the new property, the finishes and the cost of dealing with any issues around demolition, contamination, flood risk, drainage and ground conditions.
We are able to help you through this process and talk to you about whether your budget is realistic.
Brownfield land – developed land that is vacant or derelict – may be cheaper to purchase than an undeveloped greenfield site. But development costs will be higher, as you’ll have to deal with demolition, stabilisation and contamination.
Guide prices given in auction catalogues are just that, only a guide. If many people are interested in a particular plot, the price is likely to rise.
A reserve price, agreed between the auctioneer and the vendor, is the minimum price the seller is prepared to accept for their plot. The reserve price is confidential and not disclosed to any parties. If it is not reached the auctioneer will withdraw the plot from sale.
- Bring your identification documents and evidence of address to the auction. If you are using an agent to act on your behalf, their details will also need to be verified.
- You will need a 10% deposit in cleared funds before the day of the auction, and the balance of the purchase by the time set for completion of the contract.
- Get all the legal advice, surveyor’s research, and designer’s input you need before the auction.
- Check before you arrive at the auction that the lot you are interested in is still available – it may have been withdrawn or sold.
- If you are successful, the insurance risk of the property falls to you, so you need to have in place potential insurance in case you win.
- On the fall of the hammer a Memorandum of Sale will be agreed, where your deposit is handed over. Sometimes the auctioneer will also add a buyer’s fee.
- If you are not able to complete the purchase, you will be in default of the legal contract, and the auctioneer will be entitled to resubmit the property for sale. You will also be at risk of a claim for any loss incurred as a result of reoffering the property for sale.
Land auctions can provide you with a real opportunity to find an exclusive building plot. The key to success is research, and being organised and analytical in your approach. Spend time on the desktop research and assessment of the site’s potential. Visit the site and then, if something is of genuine interest, arrange legal research, professional advice, financial appraisals and a loan if required, all before attending the auction.
We have the necessary experience to assist with this process. If you think you have an opportunity you would like to consider at an auction, please get in touch using the form below, or call on 01530 560939.
Photo credits (top) Photo by DAVID ILIFF. License: CC-BY-SA 3.0; (middle) Photo by Rept0n1x. License: CC-BY-SA 3.0