While the housing market may have been quieter than usual last year, one area where business has been booming is at property auctions. Savills, one of the biggest property auction houses, reported a record year in 2023, selling over £570m worth of property, nearly a 50 per cent increase on 2022. Moving its auctions online and live streaming sales during the pandemic has been such a successful move that the real estate company has decided not to return to physical auctions, as online has proven to be less intimidating and more accessible to potential bidders.
Auctions are a great way to uncover unusual properties that won’t find their way into an estate agent’s window, often needing a great deal of work. With property prices continuing to rise, this can be a way of finding an affordable property which you can make your mark on and potentially sell at a profit. But making sure you plan carefully, go into it with your eyes open and seek advice, is crucial.
One of the most important things to remember is that you must get your finance in place before the auction as deadlines are extremely tight. If yours is the winning bid, then you are committed to the purchase as the sale is binding, with contracts exchanged on the day of the auction. This gives you certainty but you are also on the hook, putting down 10 per cent of the purchase price and committed to paying the balance within 28 days. This doesn’t allow for much time to arrange finance if you need it.
If you are not a cash buyer, you will most likely need a bridging loan. Funds are released quickly – usually far faster than a standard residential or buy-to-let mortgage – enabling you to fund all or part of the required works. Bridging finance is a short-term option (pricing is on a monthly basis with loans usually running for up to a maximum of two years). Once the works are complete, the idea is that you refinance onto a mainstream residential mortgage (if you plan to live there) or a buy-to-let if you are renting it out. Alternatively, you can sell the property and repay the loan.
Bridging loans are available to individuals, sole traders or via limited companies on a residential or commercial basis. At AWS Private Finance, we have plenty of experience in arranging bridging finance and good relationships with specialist bridging lenders so we can get the right funding for your circumstances. Please get in touch for more information.
Top five tips for buying at auction
1) Research properties and auctioneers in the area. Get on mailing lists to receive auction catalogues.
2) Arrange viewings before the auction. Make sure you inspect the property and its location; don’t just bid ‘blind’ on the day of the auction. Find out what work needs doing and what it will cost, taking a trusted builder with you.
3) Obtain the auction particulars. Searches are often included in the legal documents but if not, ask your solicitor to do them before the auction.
4) Set your budget beforehand. If you are using bridging finance, speak to a broker such as AWS Private Finance to find out what you can afford. As soon as your bid is successful, get back in touch with your broker to process your application as speed is of the essence.
5) Make sure you are certain about bidding as if successful, you are bound by the terms and conditions. If you later pull out, it could cost you a lot of money.
