Whether you will be charged a fee for organising a short-term loan depends on the company. Many auction finance lenders are happy to pay legal fees for the loan and some are willing to waive exit fees as well. You will, however, be expected to have your own solicitor for other matters, such as checking over documents for you and making an offer on a property etc.

Speedy decision-making

You should get a decision in principle within 24 hours. Following that you will quickly receive terms in full for the loan from the majority of financial conduct authority-regulated specialist lending companies.

Quick take-up

Once your loan is accepted you can also expect to receive it quickly – in around seven to 10 days maximum. You can then carry on with your auction purchase.

A personal service

Unlike large impersonal bands or building societies, most specialist auction finance lending companies are small, often with only a handful of staff. This means customers have the opportunity to become familiar with finance auction staff and vice versa. It also means you will have the one individual to see you through from the minute you apply for the loan to its appearing in your bank statement.

A tailored service

Your loan will be tailored to what you need with its length and interest terms based on what is best for your own individual circumstances. Specialist borrowing such as auction finance doesn’t lend itself to the typical high street ‘one size fits all’ solution. Because we all know that simply isn’t the case.

No major credit stipulations

The loan you want to allow you to buy a property at auction will be secured against the value of that very property you intend to buy. In some cases it may be secured against other assets you have. Because of this there is no need for the lender to undertake a rigorous approval process such as a credit history check or insist on yearly business plans and lengthy cash flow forecasts.

Flexibility

You don’t actually have to arrange the loan prior to auction. Because of the speed of acceptance and receipt it can be organised after you have made a successful bid for the target property you want at auction. The main point is to have the loan prior to completion of the purchase (usually a month after the purchase date).

Property being sold for auction is often at bargain prices. It’s not on the market as the seller is often after a quick sale. That could be because it is a bank wishing to retrieve its money quickly from the property or it could be the property has been inherited and, again, the seller wants to move on quickly. Another reason – one we have already touched on – is that the property is so badly in need of repair that most ‘normal’ buyers wouldn’t touch it. As a result it is actively being sold as a refurb property to builders and property investors who can always profit from such property potential.

And, on the subject of refurb properties, it’s worth pointing out here too that the majority of high street lending companies won’t provide a mortgage for a run-down and dilapidated property.

Auction purchases in the UK usually involve a standard procedure that all auction houses have to adhere to in order to remain within the law. The main points are:

Payment within 28 days

Once a property has been bought the successful bidder will be asked to put down a 10 per cent deposit. He or she will then have 28 days to come up with the remaining 90 per cent of the cash for the value the property sold at auction.

Properties listed in auction catalogue

You can go and see properties in advance of the auction by checking the auction houses catalogue where all properties should be listed. This gives you time to undertake due diligence. You can, for instance, find out how much it will cost to refurbish the property, what the area is like, and the cost of other properties there. That should let you know if it can turn into a profitable purchase or not.

Legal packs available

Properties for sale at auction should have a legal pack. This confirms that the property is legally entitled to be sold. There are occasions when your solicitor may have to request this from the auction house as it isn’t always presented along with the catalogue description.

Guide price isn’t reserve price

The guide price of a property at auction is simply the starting price. The property you like could go for much higher – or even lower – than that. If the sellers has put a reserve price on the building then this is the minimum he or she is willing to accept. It’s not unusual for the reserve price to be as much as 10 per cent higher than the guide price.

T & C’s of sale

Once that gavel goes down on your bid, you have bought the property. At the end of the auction you will be expected to pay the deposit and sign a contract agreeing to the rest of the payment schedule. Changing your mind about the property after this point could prove expensive as you’ll be expected to pay the seller’s costs for re-advertising at auction, as well as their legal fees. Also, you probably won’t get your deposit back.

Private auction sale

If, at the end of an auction a property is left unsold then by registering your interest with the auctioneer you may be able to get a private sale at the end of the event, using the same auction finance.

Auction fees to pay

Both the buyer and seller has to pay fees when a house or commercial property changes hands during auction. For the buyer this is often referred to as an admin fee. There is to stated price for this, it varies depending on where the property is sold. It’s worth remembering as it can be quite a chunk – up to £1000 in some cases or a percentage of the purchase price.

So, where will you spend your auction finance once you’ve obtained it? There are plenty of property auction houses throughout the UK. Just make sure whichever one you choose to buy at is regulated by a trustworthy organisation such as NAVA property mark.

Most traditional auction houses these days also offer an online facility where it’s possible to register a bid live online at the auction website. This opens up the room to further competition, of course, so it’s not always possible to get the same kind of bargain as you would at a traditional set-up with your auction finance.

There are websites which aggregate the majority of property auctions taking place, and where. Some of the large estate agents such as Savills and Countrywide hold property auctions while you can also look online at a website such as Zoopla or Rightmove. There are also a number of dedicated auction houses which will send out brochures featuring forthcoming properties for auction, as well as emails on dates and places if you sign up to their newsletter.

For more information on how auction finance works and how to obtain it take a look at the appropriate page on our website today.