growing demand for auction property

With the current fast-moving property market, property auctions, particularly online property auctions, are appealing to a wider range of buyers and investors, who are increasingly visiting auction rooms in a bid to find a bargain.

Demand for auction property has grown over the last 12 months. Recent data from EIG Property Auctions showed a 15% increase in the amount raised from property auctions compared to this time last year. The increase is driven by the frenzied demand across the housing market, which has forced many buyers to seek alternative solutions- with auction property appealing as it means they can move quickly and securely.

If you are considering buying a property at auction, then it is essential to do your research in advance. Here’s what you need to know, as well as how MT Finance can help.

why buy at auction?

Auctions are a great place to bag a bargain with immense investment value. Property investors can benefit from buying a property at auction at below market prices, typically within a 28-day time frame, this makes the process significantly cheaper and faster. You can also benefit from contributing smaller deposits of 10%.

There are no hidden surprises when buying at auction either- if you’re the highest bidder at the final hammer, you have legally purchased the property. No more gazumping!

What’s more, there’s often a wider range of property available and it’s possible to find some real gems.

what you need to know and how to prepare

When it comes to buying a property at an auction, it really does pay to do your homework. Here’s what you need to know before stepping into – or logging onto – an auction room.

do your research

Preparation is key. Research the locations you’re interested in and find auctions which cover that area. Sites such as  Property Auction Action are a great resource for finding auction houses, auction dates and catalogues. If you’re intending to rent out your property, look at what existing rentals in the area currently fetch. This will help you to gauge what the return on investment will be.

To help give you an understanding of the process as well as the speed, watch an auction online. Not only are they more accessible and less location-dependent than they used to be, you can also watch proceedings before taking part in a bid.

go on viewings

Be sure to keep an open mind. As auction properties can often be in a poor state of repair, it is important that you really try and envisage their potential. It will also give you an idea of what works are needed and how much these may cost. These factors will help you to decide what your maximum bid is.

get your finances in place

When buying at auction, securing finance is one of the most important aspects but with only 28 days to complete the transaction, you will need to find something fast.

If you’re not a cash buyer, short-term property finance could be the ideal solution to helping you secure your purchase. Where a mortgage could take a few months to secure, auction finance or a bridging loan is typically used as this type of finance can be secured in a matter of weeks.  What’s more, traditional mortgage lenders are unlikely to lend on properties requiring major work, whereas a property finance lender can, provided the property is wind and watertight.

It may be worth getting a decision in principle beforehand. Some property finance lenders, such as ourselves, can pre-approve your funds before you go to auction.

Remember that you will also need your photo ID, proof of address and your 10% deposit on the day.

the legal pack

The legal pack contains vital information for any prospective purchasers. Before bidding ensure that you check all the paperwork ahead of the purchase to avoid any unwelcome surprises. For extra certainty, have it checked by a solicitor or conveyancer who has experience of auction sales.

administration fees

Fees can vary from auction to auction, but you should expect to pay an Administration Fee which covers the auctioneer’s costs of conducting the sale. This is an important thing to check on before you bid because you will need to factor that cost into your overall budget.

stick to your budget

It can be easy to get swept away in the moment but sticking to your budget will ensure you don’t overspend or end up purchasing a property that is just too costly.

how MT Finance can help

Since we launched in 2008, we have been delighted to assist thousands of property investors and landlords with their auction finance requirements. One of the main benefits of auction finance is the speed at which funds can be delivered. Where a mainstream bank may take several months to put together a loan, we are often able to make lending decisions within hours of initial enquiry so funds could be released in less than a week.

Some bridging finance providers can work with clients to ensure they go into an auction fully prepared and at a competitive advantage to others.  Our clients look at catalogues to identify target properties, setting themselves a maximum threshold they want to pay. We can then review their loan options at an early stage, prior to auction and provide them with indicative terms. This way they can go and bid with confidence.

Even if the property has been deemed uninhabitable, we can provide funds to cover the cost of the works as well as the purchase.

For example, we recently helped a client who required funds to complete the purchase of a residential property they had won at auction. They wanted to use some of the funds towards refurbishments before selling the property on at a higher value.

As this was the client’s first investment purchase and they were unfamiliar with the process, we worked closely with them throughout. In just under 2 weeks, we were able to provide a £602,700 loan at 70% loan to value of the £861,000 open market value. Interest was retained at 0.79% over 18 months and as with all our loans, there are no exit fees or early repayment charges.

By coming to us, the client was able to complete the purchase before the 28-day deadline, meaning they didn’t miss out on the investment opportunity or their deposit. The 18-month term will give them enough time to complete the refurbishments – which will increase the property’s value – before putting it back on the market. Not only are they set to make a significant profit, but they will also be able to use the proceeds of the sale to exit our bridging loan.

get in touch

If you would like to find out more about auction finance or have spotted a property you want to bid on and want to review your finance options, fill out our enquiry form and a member of our team will contact you. Alternatively, drop us an email or call us on 0203 051 2331. You can also click here to find out more about our auction finance product.

quick enquiry