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Auction buyers have the best chance of benefitting from the stamp duty holiday

Auction buyers have the best chance of benefitting from the stamp duty holiday
Dec 01 , 2020

The stamp duty holiday, which came into immediate effect in July as part of the Chancellor’s summer economic update, has helped to sustain the property market’s boom after the first lockdown – and is expected to keep momentum up over the next few months until it comes to a close on March 31 2021.

However, there has been growing clamour to extend the deadline over fears that conveyancers, surveyors, estate agents and lenders are struggling to cope with a huge backlog of transactions. The worry is that a cliff-edge will be reached which means many will miss out on stamp duty savings even if they’ve started their transactions before the deadline ends.

As stamp duty is only paid out upon completion, if completion happens after March 31 2021 – even though the transaction has started way before that – it seems likely that buyers would miss out.

The government hasn’t budged yet, but will continue to face considerable pressure as the deadline nears.

That said, those buying and selling through auction can bypass these issues thanks to a much quicker turnaround time with transactions. Buyers purchasing through the traditional route have been warned that they need to act now to give themselves the best possible chance of completing before the end of March, and that the longer they leave it the poorer their chances of managing this are.

By contrast, those purchasing through auction can afford to leave it a bit later because of the much speedier path to completion.

Here, we outline what the stamp duty holiday is and why auction buyers have the best means of taking advantage of it.

What is the stamp duty holiday?

On July 8 2021, in a widely expected move, Chancellor Rishi Sunak announced a temporary freeze on stamp duty for all main buyers purchasing a home worth up to £500,000. While all first-time buyers buying homes worth up to £300,000 were already exempt from paying the tax, this holiday brought first-time buyers purchasing more expensive homes, as well as second-steppers, downsizers, holiday home buyers and buy-to-let landlords under that same bracket.

The savings have been considerable, with buyers in London expected to save on average £15,000 in fees.

As trade association Propertymark points out, someone purchasing a property that is worth £400,000 as a main residence would have paid £10,000 in stamp duty before the holiday, but now pays £0.

Equally, buy-to-let landlords – who have been faced with a raft of tax disincentives in recent years - were finally given something to cheer as they also benefitted from a cut. While this buying demographic still has to pay the extra 3% surcharge on additional properties, the new rate starts at 3% up to £500,000 – which means, using the same example above, a buy-to-let landlord would also save £10,000 on stamp duty when expanding their portfolio.

With savings such as these on offer across the whole of the country, demand has unsurprisingly surged as the stamp duty holiday has helped to fuel a market that was already buoyant as it bounced back from the spring lockdown.

At the same time, however, the warnings have become louder that homebuyers must act quickly to take advantage of the stamp duty holiday, with very high demand for mortgages and coronavirus restrictions creating delays in the traditional buying process.

David Hollingworth of brokers L&C, for example, said getting a mortgage was taking about double the usual time as lenders struggled with the volume of business, as well as requiring longer to review some applications.

“To get a mortgage offer in normal times you are usually looking at a couple of weeks from the application,” he told the Guardian. “Now you could be expecting it to take at least a month, or possibly longer.”

Buying at auction to get round these delays

The biggest advantage of purchasing at auction is the much simpler, faster process at hand. There are no long queues or delays, or transactions getting stuck in a logjam.

Online auctions enable people to bid for properties 24/7. Bids can be made live online, by proxy or by phone.

Property viewings can be booked online and a transaction can be secured in a quick, smooth, secure and transparent manner, within a fixed timescale.

Here at Opal Auctions, for example, we offer both a traditional online auction – where buyers can bid for properties of all types and quality – or a Buy Now service which guarantees a purchase upon a small exclusively deposit. If you want to be assured of a purchase, and getting in before the stamp duty deadline, such a service offers you that security and certainty.

When buying at auction, you will need to exchange within 28 days and complete within 14 days afterwards, so it’s vital that you have the financial means with which to do this. Once your bid has been accepted, you have entered a legally binding contract which must be adhered to. To try and backtrack is likely to prove very costly and complicated.

Due diligence, and checking the legal packs closely, is mightily important – just because the auction process is quicker and much more immediate, doesn’t mean it’s any less thorough or rigorous.

You can find out more about the bidding process here.

Similarly, if you choose to purchase via the ‘Buy Now’ service, you will also have 28 days to exchange contracts and a further 14 business days in which to complete the sale. At this point, the sale becomes secure and binding for both buyer and vendor.

You can find out more about our ‘Buy Now’ service here.

While the auction process is a much quicker affair, and allows you more time to take advantage of the stamp duty holiday as the deadline nears, it’s still best not to leave it until too late – just in case there are unforeseen issues, an auction is cancelled or delayed, or your desired property is suddenly withdrawn from the market.

You might also find the bidding process particularly competitive, and find that you lose out on the property you have set your sights on.

Like with a traditional house purchase, buying at auction requires preparation, due diligence and patience – but the process overall is designed to be much quicker and much less stressful.

To find out more about how we can help you to buy before the stamp duty holiday expires, with benefits such as 0% selling fees and a 28-day exchange, get in contact with us today.

You can also click here for details on our upcoming online auctions.