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Avoid the Pitfalls! 4 Tips for Buying a Property at Auction


Buying a property at auction is a popular alternative for many property investors. It can be very exciting and potentially very profitable. It’s important to forward plan if you are considering an auction purchase. The following 4 tips will help you stay ahead of the game and ensure you have the financing in place on auction day.

Tip 1: Work with an experienced adviser/broker who has knowledge of the auction financing process

The key issues with financing a property at auction are finding a lender that can meet the deadlines required as typically speaking you only have 20 working days to complete on the purchase. These are very tight deadlines that High Street lenders cannot usually work to. For example, some of our High-Street lenders are taking 8 to 12 weeks from application to completion and their processes could never meet an auction deadline.

The good news for someone considering buying a property at auction is that banks like Shawbrook have specialist departments that are set up to meet these challenging deadlines. Approvals can be obtained in 4 hours. Valuers and solicitors can be instructed on the same day that you purchase the property, and mortgage offers made within 24 hours, ensuring the tight deadlines can be achieved.

We understand the importance of these deadlines and have the experience to handle any issues that might crop up. We prioritise all our auction cases and  will work on the case to resolve any issues and ensure it progresses to completion on time.

Tip 2: Work with an experienced and fast solicitor

Before buying a property at auction, we always advise my clients to ask their solicitor to view the legal pack. When any property is being sold at auction the vendor’s solicitor puts together a legal pack consisting of the legal documents associated with the sale for examples the title deeds, special conditions of sale, land registry search, leases (if applicable) and other pertinent documents.

Your solicitor should view this pack before the auction to ensure you will obtain good title to the property and the title is suitable for a lender to provide a loan on. If a lender cannot get good security over a property because of some defect or issues with the title, then you will lose you deposit if you cannot complete on the purchase.

Tip 3: Be aware of introductory interest rates and exit fees

If you appoint the right adviser to arrange the finance for you then you can relax as they will ensure this is not an issue. If you don’t use an adviser or one that is inexperienced with auction finance, then you need to consider these very important points.

  • Be aware of introductory interest rates – These are offered by certain lenders who advertise low interest rates but the small print shows this is only for a limited period of 3 months after which the interest rate doubles.
  • Avoid hefty exit fees – Another fee to watch out for it the exit fee. This is a fee that some auction finance lenders charge when you settle the loan and is expressed as a percentage of the loan amount.
  • Is interest charged daily or monthly? – Many specialist auction lenders charge interest on a monthly basis. This means if you settle a loan on day 1 of the start of a month you pay 1 month’s interest and not 1 day. The difference can be thousands of pounds.


Tip 4: Don’t get carried away with the bidding on the day

As bidding increases at an auction, it’s easy to get carried away. Lenders will only provide loans up to the valuation of a property, so if the valuer appointed by the lender does not value the property for the amount you have purchased it for then you could have a funding shortfall.

Unlike a normal purchase, through an estate agent, when buying a property at auction you cannot go back and renegotiate the purchase price to close this funding gap. With an auction purchase you have exchanged contracts and the purchase price is fixed, so overpaying for a property can lead to a funding shortfall which you will need to meet.

Try to have a maximum bid that you don’t want to go over and stick to it. It should be based on your research and knowledge of the local market and will ensure you don’t overpay for a property.


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David Tonks | 01206 544 333
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David Tonks | 01206 544 333