Speed is of the essence when purchasing at auction so you need to have access to fast auction finance. As specialists in this field, we can find the best auction finance to suit your needs whether you’re looking for a mortgage, a bridging loan, development finance or land finance. So how quickly do you need to complete on an auction purchase?
Generally, when the hammer falls, you pay a 10% deposit and enter a legally binding contract. You then have 28 days (subject to any conditions within the legal pack) to pay the remaining 90% of the purchase price and complete the transaction. This is known as an unconditional auction sale.
Using a mortgage as your auction finance
When using a mortgage to finance your purchase, you need to know what the lender is prepared to loan you before you attend the auction. You also need to provide proof that you have funds available when you enter the auction house. As 28 days is a short timescale, you need to get your mortgage in principle in advance and be sure that your lender can complete the mortgage arrangement in time.
At Trinity Finance, we have formed excellent relationships with lenders who offer a wide range of mortgage products and can quickly provide you with a mortgage in principle. These lenders understand the time pressure for auction purchases. They push ahead to finalise your mortgage arrangement in the shortest possible time.
Arrange a mortgage valuation and a survey in advance
To help move things along, we recommend you have a mortgage valuation carried out before the auction date. All lenders require a valuation and having one done in advance saves time between exchange and completion. The lender isn’t obliged to loan you the funds and may withdraw your mortgage deal if the valuation is unsatisfactory.
You should also have a survey carried out to check the structural soundness of the property. If issues are brought to light, such as subsidence or evidence of Japanese knotweed, this can affect your mortgage arrangement. Being prepared ahead of the auction is essential to achieve the 28-day completion.
Using bridging finance
Unexpected delays can occur. You may feel more comfortable putting short-term finance in place while the mortgage arrangement is finalised. Bridging finance gives you fast access to funds. It allows you to bridge the gap from paying the deposit until your longer-term finance is ready.
A conditional auction sale — benefit from more flexibility
Whereas an unconditional auction sale restricts you to a 28-day completion timescale, a conditional auction sale offers more flexibility as you have a longer time to complete. You don’t have to exchange contracts immediately and this option gives you 28 days’ exclusivity to do your due diligence. When this period has expired, you have another 28 days to complete the transaction. This provides breathing space to secure your longer-term finance, such as a mortgage, to liaise with your solicitor and to find adequate buildings insurance, among other tasks.
The legal process
A legal pack is usually provided for each property available at an auction. It is prepared by the seller’s solicitor and contains legal information relating to the property. This includes the special conditions of sale, title deeds, searches and office copies.
Check the special conditions
In particular, check the special conditions, which are specific to the property and determine the terms of the sale.
There may be arrears on the property, for example, that the seller tries to pass onto you and this would be noted in the special conditions.
Once the hammer falls, you have exchanged contracts and are no longer in a position to argue against this. Therefore, it’s essential to do your due diligence before the auction.
You should also check whether the completion timescale has been altered from the usual 28 days. It’s possible that the seller may insist on reducing the time by a week or even two.
Note whether there are any restrictions on what you can use the property for or whether you have to adhere to specific terms before completion can go ahead. An example of this is having to obtain a landlord’s permission when buying a tenanted property.
Other essential checks
Be sure to check the seller is the actual property owner. Also check the legal pack for details of any disputes with neighbours or costs that the seller might be passing onto you, such as the search fees or the auction cost.
When purchasing a leasehold property, ensure the length of the lease is adequate for a mortgage term. Also check for notices of major works and any arrears that you might be liable for after completion.
Ask your solicitor to check the legal pack
You might find the information confusing as the pack can contain a lot of legal jargon. Therefore, we strongly recommend you ask your solicitor to check it before you arrange your finance and attend the auction.
Your solicitor will quickly notice anything unusual that you need to be aware of.
We liaise closely with solicitors and are happy to recommend one to handle the legal aspect of your auction purchase.
We provide a fast and competitive auction finance service
Our auction finance experts can swiftly arrange your finances for a smooth auction purchase.
Whether it’s a mortgage in principle to a fast completion or a short-term loan, we can ensure you have the funds you need in the given timescale to finance your purchase.
Thanks to the good relationships we have with lenders and our extensive knowledge of auction finance, we have access to the best deals available. We can offer you the optimum financial solution to meet your needs.