Buying at auction – why it’s vital to get finance lined up first
INVESTORS KEEN TO SNAP UP A PROPERTY AT A BARGAIN PRICE MAY BE TEMPTED TO BUY AT AUCTION. THIS IS ONE WAY OF SECURING A QUICK PURCHASE BUT YOU MUST GET YOUR FINANCE LINED UP BEFOREHAND BECAUSE YOU HAVE TO COMPLETE WTIHIN 28 DAYS OF A SUCCESSFUL BID.
The vast majority of bidders at a property auction are investors rather than those buying a home to live in. Auctions tend to have a wider selection of properties suitable for investors, such as development projects, commercial premises and land for investment, as well as your more traditional buy-to-let.
The biggest advantage of buying at auction is speed of purchase. The standard turnaround time is 28 days, far quicker than most people are used to when buying via a high-street estate agent.
Most investors require finance to cover the purchase and often refurbishment of these properties. The buyer exchanges contracts on the day of the auction and puts down a non-refundable 10 per cent deposit. The financing options are the same as for buying a property elsewhere, with the exception of the added time-pressure, so an investor can choose a buy-to-let mortgage or bridging finance. The important thing is to have already thought this through and got financing arranged prior to the auction. Otherwise, there isn’t much time to get the finance in place to ensure you meet the tight timeframe.
At SPF Private Clients we have a dedicated auction finance team who are used to dealing with the tight timescales of buying at auction. The team is often approached by purchasers who have bid successfully at auction but haven’t thought about the mortgage. Subsequently, they have little time to get the necessary finance in place. This can be extremely stressful so plan ahead and don’t get caught out.