Property development & auction finance. UK expert advice on auction financing options. Get your funding in place before you buy.

Property Development and Auction Finance

Auction Finance is a specialist area of unsecured lending, so it is important to be prepared and to get ahead of the game. Buying property at auction is a very different experience to buying property under normal circumstances. Bidding on a property can be both exhilarating and risky.  The last thing you need to worry about in the auction house is whether or not you have the appropriate finance in place before you start bidding on your dream property.  

There are several ways to fund property purchases at auction.  You may choose to use a Bridging Loan, charged against property that you already own.  You may have decided to use other methods to fund your purchase such as a Development Loan or Commercial Mortgage.  Whichever method that you choose, you will need to be thoroughly prepared. 

Property Auction Finance in the UK – When Time is of the Essence

Property auctions usually require a non-refundable 10% deposit on the day, payable as soon as the hammer drops, and you have agreed to the sale price.  Completion of the transaction happens pretty quickly.  Typically, your vendor and auction house expect you to complete the purchase within a month.  You would be wise to make sure that you have the money ready to pay for your purchase, and this will require some prior planning.

Specialist Auction Finance companies and lenders can help to make the process to run as smoothly as possible.   Even if you have equity an existing property portfolio that you can use as security, applications for funding can take time to process.  And time is one thing that is extremely scarce in an auction buying scenario. 

Auction Finance in the UK – What is an Agreement in Principle?

Auction Finance companies are used to dealing with individuals who are looking to purchase property at auction.  They are experienced in assessing applications and releasing the funds required very quickly. If you approach a specialist lender  ahead of the auction, they may be able to raise an ‘agreement in principle’ for the loan.  You will then know that the funds are in place before you put a bid on any property. 

At this stage, the lender will undertake all the necessary checks on your financial affairs.  This will include an assessment of the amount of equity you have on existing properties, credit and income checks, property valuations  etc. so that the lender can be assured that their money is secure.

Using a Broker to Find an Auction Finance Company

Using a broker to negotiate lending on your behalf can take away a great deal of the pain and stress. You can rely on the experience of our advisors to make sure that you are given the best advice.  A broker can also speed up the time it takes for funding to be agreed and put in place. 

If you are an experienced developer, then this process is a relatively straightforward one.  Specialist auction financing companies are more likely to lend to individuals with a successful track record in property development. They are also most likely to lend to individuals with an existing property portfolio and lenders expect them to use this collateral against any lending.

It is also good to know the full market-price value of the property that you are interested in. This will potentially offer some flexibility from your lender – especially if you are after a bargain with a low reserve price.  Auction Lenders may then set a ‘limit’ on what they will loan you against particular property type – for example on a 3 bedroom terraced house .  This means that when you are bidding, you will know what your maximum bid can be. 

The more seasoned you are as a property developer, the more adaptable your lender is likely to be. It is possible for experienced professionals to be given a maximum budget for a particular auction so may be able to purchase more than one property at the sale. 

Always remember that auction buying can be extremely lucrative, but it is also risky.  Properties are ‘sold as seen’ and there may be underlying problems that are not immediately obvious.  Proceed with care. 

Our advisors are trained specialists and will be able to offer you independent, professional advice.