How to buy property in Ireland, Simple Guide, Fleming Real Estate, From property searching, bidding process, sale agreed, booking deposits to closing.
Trying to buy residential or commercial investment property in Dublin, Ireland. Need Help?
As someone that has been involved in Residential and Commercial real estate for 15 years. From selling, buying and asset management of real estate.
I sometimes forget that many people do not understand the steps required to purchase a property. Which leads them to become very frustrated by the entire process.
Blaming estate agents, vendors, solicitors and banks for delaying. However, much of this frustration can be avoided with better knowledge of the process and proper planning.
Understanding Methods of Property Sells
In Ireland, estate agents will use several methods of selling real estate. The method selected may depend on the property and client’s requirements and methods used also differ between residential and commercial property. Some methods have time limits and lock the buyer in, and others have no time limits and buyers are not locked in until contracts are signed. The main sales methods include:
Private Treaty Sale: The most common method of sale of both residential and commercial property in Ireland is a private treaty. Under this method, a price is put on a property by the vendor which is usually subject to negotiation between the vendor’s agent and prospective buyers. Once the vendor accepts an offer, the property is marked as sale agreed.
The buyer will generally have to put down a booking deposit, the level of a booking deposit will generally depend on the agreed price. This booking deposit is refundable if either party wish to pull out of the deal up to the point contracts are signed. In a private treaty sale, neither party is bound to the deal until contracts are signed. There is generally no time limit ongoing sale agreed when dealing with a Private Treaty Sale unless an agent opts for final and best bids during negotiations.
Sale by Auction: In the past real estate auctions were generally used for quick sales, where there was underlining legal or structural uses or distressed property sales. This was because private treaty sales generally resulted in higher sales prices. However, with the introduction of online auctions by companies such as BIDX1. Auctions are no longer just reserved of distressed properties and sale by auctions are becoming more common.
At an auction a reserve price is generally set, this is the price the vendor will accept if there are no higher bids. If a reserve price is not reached, the vendor does not have to accept the highest offer. The main difference between Private Treaty and Auction is that a bid is binding at an auction and 10% of the agreed price is due on the day of the auction. The closing is generally 28 days after the auction.
Sale by Tender: Sale by tender is like a silent auction. However, it is not that common of a method for sale; it is very uncommon in the residential market. It is sometimes used for commercial property where agents believe there will be strong demand and sometimes used for development land and investment property. Generally, the property is marketed for sale with or without a guide price, and there is a deadline for all offers.
Anyone interested puts in their offer and the vendor is presented with these offers, which are private, to be considered on the day. The vendor’s agent will set out the terms of the tender process. Generally, potential buyers will not only include their bid but will list their conditions. The vendor does not have to accept the highest bid as other conditions may be more favourable.
Mortgage/Finance vs Cash
In residential purchases for owner-occupiers, a lender will offer 80% Loan to Value (LTV). First-time buyers can secure a loan on a deposit of 10% on the first €220,000 and 20% of any balance above €220,000. The Help to Buy tax rebate of up to €20,000 is available only to first-time buyers to help them purchase a new home in Ireland. The home must be purchased from a qualifying contractor.
Many lenders will offer up to 70% LTV loans for buy to let properties. There is a range of different finance options for commercial properties and development sites. Ranging for straight loans, bridging loans and JVs. In commercial property, many lenders will require that an SPV is set up rather than lending to an individual. The percentage of LTV allowed will generally depend on the property and its location.
It is advisable to have finance pre-approved before making any offers on any properties.
Cash buyers generally have an advantage over buyers that are subject to finance. Mainly due to the fact that they can move through the legal process faster. Cash buyers can make all the decisions without having to wait on their lender to approve contractors or release funds.
Foreigner buyers can buy property in Ireland. There are no restrictions for foreigners purchasing property in Ireland. The investment climate is favourable for foreign businesses. There are no restrictions on foreign nationals buying property in Ireland. This means that both EU/ EEA and non-EU/ non-EEA nationals can purchase property here without limitation. Owning residential property in Ireland does not entitle the owner to a right of residence here.
If you are from Ireland, you will know that Myhome and Daft are the two main property databases for commercial and residential property sales. If not from Ireland Myhome and Daft are the two best places to start your search. If you do not have the time to carry out the search yourself. You can engage an acquisition surveyor to carry out the search on your behalf. An acquisition surveyor can be even more helpful in dealing with the commercial property. As reviewing existing leases and unlocking development potential is vital to understand before placing a bid.
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It is important to view as many properties as you can before making an offer. You should consider as many options as you can and narrow your search to the location you wish. It is always advisable to view the property at different times of the day and understand what is around the property. If viewing at the weekend, it may seem quiet, but if business or schools are near the property. It could be very busy during the week with heavy traffic and parking issues.
With commercial property, it is nearly more important to review leases, planning and development options as they are the main items that underpin the value of the property.
Making Offers on Property
I believe this is one area where many people do not understand how to do it correctly and miss out on the property they want. First off you need to know your maximum bid and refurbishment costs and acquisition costs including stamp duty. Then do not go past your maximum bid at auction or at private treaty. Before placing your opening bid understand if there are any other bidders and if so, how many and where each current bid stands.
You need to consider your bid carefully and what you are trying to achieve. Are you just placing a bid knowing a higher bid will be received, or should you place a bid in the hope to scare off other bidders. The percentage of any bid increase should also be considered, a €10,000 bid increase on a €500,000 property is a 2% increase and may remove some interest in the property. However, a €10,000 bid increase on a €5million property is only a 0.2% increase and will not dissuade any interested party.
But In a Bid
If you are interested in a property, you should place a bid and not just wait and see as the property could be sold from under. If you want to try to secure a property and put pressure on for a fast decision, there is no point making an offer below the asking as a quick decision will not be made. If you want to put pressure on you will need to match the asking or higher.
Offers do not have to be just limited to the money element, offers can include an offer of a fast closing, and offers also do not have to just be one bid. You can make a high offer subject to a number of conditions or changes. Such as subject to planning or subject to a new lease being agreed, along with a lower offer where you take the property as is without any conditions.
Once an offer is accepted
Once your offer is accepted you will generally be asked for a booking deposit. The amount of a booking deposit required will depend on the value of the property. Also, booking deposits are usually more common in residential properties. A booking deposit is fully refundable if either party opts out of the transaction and either party can opt out at any time up until contracts are signed. When a booking deposit is received the property is marked as sale agreed and contracts are issued by the vendors solicitor to the purchaser’s solicitor to review.
At this point, it would be common to carry out building surveys and bank valuation if required. Generally, in residential acquisitions, it would be only worthwhile going to the expense of a building survey once your offer is accepted. In commercial property, it may be required to carry out a building survey before placing an offer, so you are fully aware of the costs involved.
After the purchaser’s solicitor has reviewed the contracts and is happy with the property title. The purchasers are happy with building a survey and banks have approved the loan. The purchaser’s solicitor will advise the purchaser that they can sign the contracts. Once contracts are signed a 10% non-refundable deposit is required. When both parties have signed the contracts the sale is binding. Closing date will be agreed, and the remaining balance will be required on closing. Generally, 28 days are allowed from signing in most transactions. However, the closing date can be agreed between each party.
In residential sales, contents are not included in the sales price other than white goods and built-in furniture. Any agreement on including the contents can be agreed between both parties. However, it should be noted the agreed price of the contents should be stated separately in the contracts so as not to pay stamp duty on the contents.
In commercial and investment properties it should be noted that any leases remain in place and the tenant’s rights are not affected. Any deposit held should be transferred to the new owner and tenants contents and fit out should be noted.
Assuming all the required legal information and tax clearance has been received. The closing date agreed between the parties and set in the contract, should go ahead as agreed. On closing, the buyers will transfer the remaining balance to their solicitor including stamp duty and legal costs. Once this is confirmed and transferred to the vendor’s solicitor. The vendor’s solicitor will advise the agent that they can hand over keys to the building.
In residential property, items such as LPT and service charge will be apportioned based on the date of closing. In commercial/investment property any of the landlords running costs will also be apportioned. Along with any rental income from the date of closing. The new landlord will be entitled any rent beyond the closing date.
There are several additional costs to keep in mind with acquiring a property. The costs will vary from property to property and from residential and commercial. Costs include;
Legal Costs will arrange from 0.7% to 1.5% plus vat at 23%. There will be additional costs for registering the title.
Stamp duty on residential property is 1 % up to the first €1million and 2% on anything over €1million. Stamp duty on commercial property is 6%.
Agent fees. If you opt to engage an acquisition surveyor, the costs will range from 0.5% to 1.5% depending on the requirement plus vat at 23%. In Ireland, these fees are not paid by the vendor’s agent. Need an agent https://flemingrecom.wpengine.com/lp/acquisitions/
Costs of a building survey will depend on the property. Generally, a residential survey range from €300 to €800. A commercial survey’s range from €600 to a few thousand depending on the building.
Valuations, lenders will require a valuation. Residential valuations costs between €80 to €350. Commercial valuations will generally start from €1,500 and will rapidly increase depending on how complex the development is.
Our advice on property acquisition is to seek to advise as it is likely one of the biggest investments you will ever make. An acquisition surveyor can make sure you avoided pity falls. Save costs in the long run and saves you wasting time searching for a property.
Always know your budget and stick to it.
Think about your bidding strategy.
If you do not understand commercial leases, ask someone who does and not just a solicitor someone with the commercial property knowledge.
Get a good solicitor and take on their advice but also understand that sometimes there are commercial decisions to be made which your solicitor will not be able to advise on.
If you need more advice, Fleming Real Estate can provide additional advice and support.
By Fleming Real Estate, Dublin, Ireland, Acquisition Surveyors Dublin Ireland
Email: [email protected]
If you need help finding the perfect investment property in Dublin Ireland. Fleming Real Estate can provide tailored services to meet your requirements.