Ultimate Guide to Buying a Property

Ultimate Guide to Buying a Property

Buying a property is a very significant step and can be a little daunting to the uninitiated. In this guide, we hope to demystify the steps involved, decode some of the lingo and serve as a useful resource as you commence your journey to buying a property. Before we get into the nuts and bolts of buying, we have included a quick jargon buster here:

Ultimate Guide to Buying a Property

Decoding the Lingo

Vendor

The person(s) selling the property.

Auction

A process whereby a property is sold to the highest bidder. Bids on properties are legally binding. Auctions can be held at a specific place or online but start at a specific time and close once a bid is made that no one else is willing to beat. An auction has a defined start time and ends that same day.

Decoding the Lingo

Private Treaty Sale

A property vendor puts a property on the market and invites offers from interested parties. Typically the vendor will look to sell the property to the person who makes the highest offer, although this is not always the case. For example, if a cash buyer makes an offer €1000 less than a mortgage approved buyer, the vendor may decide to sell to the cash buyer as the sale will close more quickly. Offers made on a property being sold by private treaty are not legally binding and can be withdrawn without penalty right up to the point that contracts are signed. This makes the process a lot less daunting than an auction as if a buyer changes his/her mind, (s)he can simply withdraw the offer.

Cash Buyer

A cash buyer is a buyer who intends to finance the purchase of a property purely in cash and does not need to rely on borrowing (a mortgage) to complete the transaction. Cash buyers are sought after by vendors as they can typically conclude a transaction more speedily than buyers who are relying on a mortgage to complete a transaction.

Cash Buyer

Mortgage

A loan issued by a financial institution to buy a property. The loan is secured against the property. The financial institution will insist that the buyer places a cash deposit for a minimum of 10% of the purchase price. This means that even if property prices fall by 10% and the borrower defaults, the bank can repossess the property, sell it and reclaim the balance due to it. In reality, repossessions are extremely rare in Ireland as banks will always try to work with a borrower, with repossession very much being seen as a last resort.

Offer / Bid

These words are used interchangeably. Technically, one places a bid at auction (which is legally binding) and an offer on a private treaty sale (which isn’t legally binding). More on this to follow below.

Offer & Bid

Asking Price

The asking price is used on properties being sold by private treaty. It is an indication by the selling agent / vendor as to the price they are expecting to receive for the property. You can make an offer for below the asking price if you wish. Auctioneera will not typically entertain offers less than 95% of the asking as to do so would be pointless as the vendor would remove from the market before accepting an offer below that level.

Deadline for Offers

This is the time / date after which no further offers will be entertained in a private treaty sale. At Auctioneera.ie, if a buyer makes an offer for the asking price of a property, we will automatically set a deadline for offers of 15 days after the date of that offer. Once we set a deadline for offers, we start a countdown timer on our website showing the time left until the expiration of the deadline. This can give the Auctioneera website the feeling of an online auction but all properties are being sold by private treaty ie offers made are not legally binding but rather are an indication by a buyer of an intention to transact at the amount of their offer.

Proof of Funds

Proof that a buyer has the money to follow through on his/her offer amount. See our post on proof of funds.

Booking Deposit

When a buyer and a seller agree on a price for a property, the estate agent will ask the buyer to place a booking deposit on the property. This booking deposit is lodged to the estate agent’s client funds account and remains there right up until contracts are signed. At any point prior to the signing of contracts, the buyer can request his/her deposit back and the agent must refund immediately, no questions asked.

Sale Agreed

Sale agreed means that a sale has been agreed in principle between a buyer and a seller for a certain amount. It has no legal basis however as either party can walk away from the transaction at any point, for any reason right up until contracts are signed.

Gazump

If a bidder makes an offer on a sale agreed property and the vendor accepts that offer, the bidder with whom the sale had been agreed is said to have been gazumped. Auctioneera will not entertain any offers after a property has gone sale agreed as we feel to do so utterly undermines the entire process and totally breaks trust. Integrity is a core value at Auctioneera and we would not facilitate gazumping.

Sales Advice Notice

Once a property is sale agreed, the estate agent will issue a sales advice notice. This is a simple one page document that appraises both sides’ solicitors as to what has been agreed. This covers the price agreed, the parties involved, as well as what’s included in that amount eg furniture.

Conveyancing

Once the estate agent has issued the sales advice notices to both parties’ solicitors, they commence the legal process of transferring the title to the buyer and the funds to the seller. This can take several weeks. If an estate agent is the first person you call when selling your property, a solicitor should probably be the second. You don’t want to wait until the property is sale agreed to contact a solicitor. Ideally a vendor will have all paperwork to hand the moment a property is sale agreed and can send it to the buyer’s solicitor without delay.


Buying a Property Step by Step

Buying a Property Step by Step

Budget

Probably the very first step is to establish what is your budget. There are essentially two things to keep in mind here: deposit and repayment capacity.

Deposit

For those buyers intending to rely on a mortgage to purchase their property, they will need to pay a percentage of the purchase price in cash; this is known as the deposit. Typically for first time buyers, this is 10% of the purchase price and 20% for non-first-time-buyers. So if you have saved €30,000 as a first time buyer, you will likely be looking at properties of no more than €300,000. It is definitely worth however speaking to a mortgage broker as banks do have a certain amount of discretion in breaching the deposit rules. For example, in certain instances a bank may be willing to accept a 10% deposit from a second time buyer.

Repayment Capacity

The Irish Central bank requires that a borrower can borrow no more than 3.5 times their salary (joint salary for a couple). So, a couple with a joint salary of €70,000 will typically be able to borrow €245,000. As with deposits, banks do have limited opportunities to breach the 3.5 threshold so a good mortgage broker may be able to assist you in getting a little more than 3.5 times. However, the goal isn’t to borrow the absolute maximum amount possible as this will result in cash left over for living being at a premium. There is no point having a really great property but being unable to furnish it or take a nice holiday as all your income is going to service a mortgage.

Starting the Search

Daft.ie and MyHome.ie are the two websites in Ireland on which you will find the full range of properties for sale. There is a lot of duplication between the two sites as the vast majority of agents will list their properties on both. Having said that, from time to time, you will find a property for sale on one website that is not listed on the other so it is best to check both just to be sure that you don’t miss out. Auctioneera lists all our properties on both Daft and MyHome.

Setting Up eMail Alerts

Logging onto Daft and MyHome on a regular basis to check if there are any new properties that are of interest to you can be quite time consuming. Thankfully Daft & MyHome both allow you to set up email alerts whereby you can input your criteria and you will automatically receive an email alert any time a new property is listed that fits that criteria. When setting the parameters of properties you want to be kept in the loop on, cast quite a wide net. For example, if you are looking for a 4 bed property for less than €400,000, be sure to include alerts also about 3 bed properties and push your price limit out to let’s say €450,000. The reason for this is that you might find a 3 bed with a very nice attic conversion that might be useful to you as a fourth bedroom and a property listed beyond your budget may be willing to accept an offer below the asking price if there isn’t strong interest at the current asking price. It’s better to get a few emails about unsuitable properties than to set your criteria too tightly and miss out on a property which you would have been interested in buying. For instructions on how to set up email alerts on MyHome, see here and for Daft, see here.

Viewings

Once you see a property that you are interested in, the next step is to attend a viewing. Many estate agents will host open viewings at the weekend and you can just pop along without registering in advance. Some agents only conduct private viewings so in this instance, you will have to call to arrange an appointment. When attending a viewing, if possible, arrive 30 minutes to an hour before the actual viewing is scheduled to start. Take this time to have a walk around the area to get a feel for it. If some local people are in their gardens or walking to their car, explain that you are considering buying in the area and would be interested to hear their views on the location. Be sure to arrive at the viewing itself a few minutes early. Many estate agents will host 30 minute viewings so maximise your time onsite by showing up on time. Take the time to have a good look around the entire property and back garden if there is one. Ask yourself would you be happy coming home here everyday.

open house
Placing an Offer

Placing an Offer

Once you have found a property that you would like to buy, now you need to think about making an offer. The conventional wisdom here is that you should always make your first offer as far below the asking price as the agent is willing to accept. The logic here is that the asking is the price that the vendor is hoping to achieve and maybe (s)he will accept a little below this amount. On Auctioneera, if someone makes an offer of the asking price, we will automatically set a deadline for offers of 15 days after the receipt of that offer. If someone makes an offer below the asking price, we will not set any deadline and wait until we receive an offer for the asking. So if you really want to buy a property, it does make sense to quickly offer the asking price to trigger the 15 day deadline and hope that no one outbids you during that time. You can place an offer below the asking price (maximum 5% below) but the property will sit on the market for longer then and you risk other bidders entering the race and ultimately driving the price higher than what it would have sold for had you offered the asking and quickly closed out the sale.
At Auctioneera, we list the current highest offer on each property on our website as well as the deadline for offers, if one is in place.

Acceptance of Your Offer

Once the deadline for offers closes, we present the top three offers to the vendor. If the vendor decides to accept your offer, you will be asked to make a booking deposit in order to move to sale agreed. Auctioneera takes a booking deposit of €2000. This is fully refundable right up until contracts are signed.

Sale Agreed / Conveyancing

Once your offer is accepted and you have paid your booking deposit, the agent will mark the property as sale agreed and issue the sales advice notice to both parties’ solicitors. The solicitors take over the process from here.

Valuation Report

If you are relying on a mortgage, the lender will require that a valuer values the property before they will release the funds. The purpose of this is for the bank to satisfy itself that the buyer is not overpaying for the property.

Surveyor’s Report

It is strongly recommended to have a qualified engineer inspect a property before signing to purchase it. If there are any issues with the building, it is better to know these in advance.

We hope that this guide has been useful to you and we hope to see you making offers soon on Auctioneera!

Valuation Report