Buying land has always been an appealing investment for those with cash to spare, and in recent years there has been strong demand for good quality land because it is seen as a safe haven for investments. The value of land has risen 15% year on year, compared to UK housing market (+10%), the FTSE 100 (+5%) and gold (-9%). This trend looks set to continue, with Knight Frank reporting a 55% increase in the value of land over the last five years (October 2014).
Buying any kind of property at auction is quite different from buying it through an estate agent. Before you consider buying land, try to attend a few auctions to get an idea of what the process involves. The biggest and most important difference is that buying at auction is legally binding, so you must do your homework about the property before the sale. Unlike buying through an estate agent, you cannot change your mind later. It is your job to find out everything that you can about the land before the auction begins.
Finding Expert Advice
Buying land at auction requires a lot of thought and planning. You should employ a solicitor with experience in land purchases in order to help you negotiate any potential pitfalls. Just as when you plan to buy a residential or commercial property, you must consider what you intend to do with the land once you have bought it.
Not all land is equal, and some land may not be suitable for your intended purpose, so you will have to consider issues such as the location of the land, its ground conditions, ease of access to the plot and the land’s area and dimensions. If you intend to build on the land you will have to consider the additional issues of planning permission and connection to utilities (which is not always possible if the location is remote). An experienced solicitor will help you to make the right choices and avoid costly mistakes.
Finding Land to Buy
If you would like to buy land it can be difficult to find it advertised on the high street. It can often exchange hands privately between farmers, developers and existing landowners, but recently more land has been offered for sale at auction. Whether for self-build, investment or recreation there has been a growing interest in the market aided by information provided in specialist publications. If you are interested in hearing more about available land, sign up to the Future Auctions mailing list, which can provide you with information on auctions in your area.
A lot of information about land for sale at auction is available from the auctioneer’s catalogue, which is available online 2-3 weeks before the sale. Guide prices may change right up until the day of sale, land can be sold before the auction or it can be withdrawn. Make sure that you get a copy of the auction catalogue as soon as possible and register your interest in the land with the auctioneer (there is usually a form to complete) to ensure that you are kept up to date with any developments.
At this stage you should also be aware of your budget. When you consider land, remember that lots often sell for more than the guide price, and that guide prices can change until the day of the auction. Be realistic about how much money you have to spend and whether the property price is right for you.
As when you are buying a house, the location of any land that you buy will affect its value. Land that is suitable for grazing horses within a short distance of a city or town can reach prices of £30,000 per acre, while a piece of land suitable for grazing sheep in rural Wales may be worth as little as £1,500 per acre.
If you wish to purchase land for leisure in order to get away from it all, such as buying woodland, you should be aware that this type of land could command high prices. Also note that it is highly unlikely that planning permission would be granted to build in such a location.
If you are looking for land in order to build your own house, location will be particularly important. Brownfield sites in an urban location may be ideal for self-build projects and may also benefit from prior planning permission, ease of access to the plot and straightforward connections to utilities.
It is important that you arrange to view land before the auction. The ground conditions will make a huge difference to the land’s value and utility. After viewing you should arrange for a land survey for any plot you might like to buy. The focus of the survey should reflect the use you wish to make of the land, for example, for agriculture or to build a house.
If you plan to use the land for agricultural purposes you will need to assess the soil type and quality, drainage and flooding issues and any possible contamination of the soil through the use of agricultural chemicals, industrial pollution or infill. You should also make sure you are aware of the ALC grading of the land. The best (grade 1) land is suitable for intensive arable crops, while the worst (grade 5) will only provide rough grazing with rocky outcrops. You should consider that there might be restrictions placed on the use of the plot, such as the range of crops that can be grown, the yield levels and the cost per yield. Land grades also play a part in the development planning process, with land graded 1-3a usually protected for agricultural uses.
If you wish to purchase land to build on you need to be aware that steep slopes will require more labour and materials to build solid foundations. An unsuitable soil type may require a large amount of work to make it ready for building, and if the land is situated on a flood plain this could jeopardize your new home and make it difficult to insure.
The most important thing to consider when viewing a plot of land is the issue of access. Does it have direct access to a public road, or do you have to cross someone else’s land? Some vendors hold back a strip of land between the access point and your land. This is known as a ransom strip – the owner of the strip can prevent you accessing the land and hold you to ransom. Your solicitor will check for this.
Sometimes landowners have a private road (which they must maintain at their own cost) that provides access to their land. You need to ensure that access is safe, and that any private road has room to drive, turn and park. If you share the road with another landowner, you may have to share costs, but the road will also have to have passing points and clear visibility. You will need to check that this access doesn’t affect neighbours or harm existing trees.
It is also very important when viewing the land to consider the shape of the plot that is available. Is it the right size and dimensions for your purposes? Consider that the area of the plot may provide the space required, but an awkward shape can quickly end any plans you might have. Building plots should be at least 1/10 of an acre and you should allow space for off-street parking and room to turn your vehicle to prevent reversing onto a main road.
Some plots of land for sale already have planning permission, but be aware that this will increase the asking price by up to 500%. While the process of obtaining planning permission can be time-consuming it can mean a huge saving at the time of purchase and an increased profit once planning permission has been granted. Remember that planning permission is more likely to be granted if the land is next to an existing building.
You should make sure that any planning permission has not expired, and will not expire between the day of the transaction and when you get started. Your solicitor will make these checks and will cover previous planning applications so you can see what has been applied for in the past and whether it succeeded or failed.
Another important consideration (for plots of land intended for self-build projects) is the issue of connection to utilities and services. If your home will be next to an existing building it will mean cheaper connections to water and electricity supplies. Consider that in remote locations it may not be physically possible to connect to the mains water supply or the electricity grid.
Finally, if you want to buy some woodland, be aware that you will be responsible for its management. Organisations such as The Small Woods Association provide information on woodland management, ensuring that people know how to care for their woodland and do not break laws or cause excessive damage to the woods.
Before the Auction
At this stage you must get the legal pack from the vendor’s solicitor and ask your solicitor to look through the special conditions of sale, title deeds, leases, office copy entries etc. Your solicitor will also do the usual property searches, checking planning permission status, and also checking whether planning permission has been granted nearby which may affect you later on. Make sure that you have read and understood all the information provided by the catalogue and the legal pack. Ask your solicitor or surveyor if you are unsure. The sale of a property is binding, so make sure you know what you are buying in advance.
If you really want to buy the land it is possible to put in an offer via the auctioneer before the auction date. In this case it is essential to have your finances in place, as you must move quickly. You should put your offer in writing to the auctioneer, who will liaise with the vendor. If the vendor accepts your offer, contracts will be exchanged immediately and you will have to pay a 10% deposit, paying the remaining 90% within 20 working days. If you haven’t paid in full by the day of the auction, the vendor may not withdraw the property and you could lose your deposit (and the property) to the highest bidder.
By the time of the auction you should have a lot of information about the land. Before you go to the auction, check that the property is still available. It may have been sold beforehand or the vendor may have withdrawn it. If the sale is going ahead, you can either attend the auction in person, make bids on the telephone or online, bid by proxy up to a limit agreed in advance with the auctioneer, or send your solicitor or surveyor to the auction to bid for you.
Make sure that you know the lot number of the land you want to buy, and are familiar with all the information in the catalogue. Get a copy of the addendum sheet, which will include last minute changes to the catalogue information, including the guide price, withdrawn lots or prior sales. If you are the successful bidder, the addendum sheet forms part of the contract of sale.
Remember to stick to your budget. In the heat of the moment you could get carried away and could bid more than you can afford. Once you arrive, or in advance, complete a registration form and make sure you have brought relevant ID documents, proof of address and a cheque or banker’s draft to cover the deposit on the property.
The auction will generally proceed with lots in the order they are listed in the catalogue. The auctioneer will announce each lot and the lot number should be shown on a screen. Make sure you are clear which lot you are bidding for, and sit somewhere where the auctioneer can clearly see you.
Do not make the first bid, as the auctioneer will lower the starting price if no one makes an initial offer. When you do bid, make clear movements, such as raising your hand or nodding your head. The auctioneer may not see smaller movements, and has the final say on whether to accept bids. The bids will go up in increments and you must stop bidding if the asking price is above your budget. The auctioneer will offer the bid to the room twice before bringing down his gavel to indicate a sale. Once the gavel has been sounded, the sale is over.
If the property you are interested in does not meet its reserve price, you can contact the vendor after the auction and see whether you can still come to an arrangement. An advantage of auctions is that it is a level playing field and you can see who is interested and how much they are willing to pay for the property. This means you can avoid paying over market value.
If you are successful, a member of the auction house staff will approach you to complete the paperwork. The 10% deposit is due immediately, and the remaining 90% is due within 20 working days. You will be asked to provide ID and your solicitor’s contact details and you will sign the contract of sale. Your part of the contract will then be passed to your solicitor and the auctioneer will retain the vendor’s part to pass to the vendor’s solicitor. Assuming the funds are in place, the sale will be completed within a month.
However, if your funding falls through, you will lose your deposit (plus any solicitor’s and survey fees etc), so try to make as certain as you can that your finances are in place before the auction.
Assuming it all goes well, you will be the proud owner of a plot of land.