How to finance buying a property at auction

How to finance buying a property at auction
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    When looking to finance buying a property at auction, you may not be aware of all the different options and finance solutions available to help you secure your purchase. Many people assume that auction properties are bought by cash buyers. However, there are alternative solutions to assist you when purchasing a property at auction.

    A bridging loan can be an effective finance solution for people looking to purchase a property at auction. They are used to help close the sale while alternative long-term financing, such as a mortgage, can be arranged.

    At One, we have plenty of property experience and understand the unique pressures of purchasing a property under the hammer. With our wide connection of auction finance brokers, we are experts in finding our clients the right people who can secure fast bridging loans for purchasing auction houses.

    In this blog, we’ll help you discover the various ways to finance buying an auction property by providing helpful tips on finding the right auction finance lender and ensuring you are in the best position to secure your auction purchase. Keep reading to learn more, or contact us today to discuss your short-term finance needs.

    How long after a property auction do you have to pay?

    A winning bidder is required to pay 10% of the purchase price on the day of the auction and must complete it within 28 days. You must make the whole payment within the 28-day time frame to maintain your deposit and your right to purchase the property.

    This small time frame means traditional mortgages are generally not suitable for use at auctions, as they can take much longer to process.

    This is where alternative finance solutions may be required – to help relieve the time pressure of buying property at an auction.

    Why would you use a bridging loan at auction?

    You might consider using a bridging loan as a short-term financing solution to enable you to pay the required property funds before the completion deadline. This gives you added flexibility while you wait for a more long-term finance solution.

    In addition, securing an auction bridging loan can give you an edge over other bidders with a clearer view of how high you can bid and how much you could have left for refurbishment if you bid sensibly.

    In a competitive bidding environment, the assurance of auction financing can make a huge difference.

    What are the benefits of auction finance?

    There are many benefits to buying a property with auction finance. One is the speed at which funds can be accessed. A bank may take many months to agree to a loan, so auction purchases using bridging loans can be much quicker.

    With the right auction finance deal secured, you can bid confidently, knowing that you’ll be able to complete the sale within the allotted time frame.

    At One, we can provide quick financing solutions to help you obtain the property you want in the Auction House. Get in touch today for a smooth turnaround and auction success!

    What does the application process for an auction bridging loan look like?

    As with any finance and funding, preparation is key in making sure you are in the best position possible and prepared for auction day. By following some simple steps, you can give yourself the best chance of being the winning bidder.

    Tip 1 – Speak to the right auction finance broker

    This one may sound simple, but it is vital that you take advice from a broker who understands how auction finance works. Preparing for what happens after bidding will help you avoid any unnecessary costs.

    The majority of our property investors use an auction finance broker for this, which we help them find. It’s one of the ways they can access good rates, find a trusted lender and ultimately be in the best position to make a quick sale.

    Tip 2 – Research the land or property that you would like to purchase at the auction

    It is recommended that you not only spend time looking for something to bid on but also look at the process that you will be following. In the excitement of bidding, many auction buyers forget that this is a legally binding transaction and that once the hammer falls, the clock starts ticking to complete the purchase.

    Take time to look through the property catalogue well before the day, visit the property or land and get proper estimates of what work is required and the cost of carrying it out. Knowing the upper limit to what you would like to bid on the day will stop you from going too high.

    Tip 3 – Prepare, prepare and prepare some more…

    You’ll need to be well-prepared before buying an auction property. Think about any additional costs involved, such as how much deposit you’ll need, stamp duty and any other fees that may be applicable.

    Having your finances in place before the day will help with the smooth running of the whole process.

    Get together your proof of deposit and your credit report that accurately reflects your credit history. Make sure you also have an idea of which property you want to purchase on auction day, along with any supporting documentation, such as a valuation report, if one is available.

    Tip 4 – Get the legal paperwork checked before the day of the auction

    Getting the Auction House legal pack and auction sales particulars checked ahead of the sale day can save you from potential issues and unexpected costs further down the line. Many transactions have been hindered by missed problems, which can affect the value of the property and even the ability to raise funding against it.

    Could auction finance work for your property purchase? Discover your options with One today!

    At One, we are property experts with access to a wide range of experienced brokers who specialise in property auction finance. By connecting you to the right broker, we can help you secure the finance you need to facilitate a quick auction property purchase.

    Whether you’re looking to make a speedy commercial property investment or find a new home for a good deal, our services can help. We provide expert advice tailored to your circumstances and offer ongoing support at every stage of the auction finance process.

    Speak to us today to find out how we can help you buy a property at auction.

    Conclusion

    There are various ways to finance buying a house at auction. Since auction buying tends to happen quickly, causing some time pressure, bridging finance can be a popular choice for meeting deadlines and obtaining the property you wish to buy.

    It is important to do your due diligence and research the properties you’re interested in, as well as different auction finance lenders. Speaking to a professional broker will also benefit you during the process, as they can help you get the best deal when looking for auction finance.

    FAQs about financing auction properties

    To learn more about how to finance buying a property at auction, check out our frequently asked questions below or contact us today to discuss your auction finance needs.

    Picture of Mark Piper
    Mark Piper

    Mark is the senior advisor at One Commercial Loans and has a wealth of experience in bridging and property finance.

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