How To Fund Buying A House At Auction | moneyfacts.co.uk

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Derin Clark

Derin Clark

Online Reporter
Published: 09/12/2021
residential housing street

Often when properties are sold at auction the seller is looking for a quick sale, which can result in the house buyer getting a much better deal on the property, which can make them especially attractive to prospective landlords.

For those considering buying a house at auction it is important that they understand how purchasing a property this way is different to buying a house by private treaty – which is how most residential properties are purchased.

For example, when buying a property at auction the bidder is committed to purchasing the property once their offer is accepted, which includes meeting any reserve set by the seller. This contrasts to making a property purchase by private treaty, where the offer is made ‘subject to contract’ and, as a result, is not binding in England, Wales and Northern Ireland.

As well as this, when buying a house at auction the buyer must ensure that they have their mortgage finance in place before entering the auction, as the full consideration for the property will usually become due within one month of the offer being accepted. This means that the buyer needs to make their application to the lender before the auction and ensure that they complete all the legal and valuation preliminaries before the auction date.

How to fund buying a house at auction

Mortgage lenders will consider applications for those looking to buy a house at auction, but the borrower may need to use a more specialist lender and may want to consider speaking to a mortgage broker for advice during the early stages of the process.

Mortgage Advice Bureau, for example, can help those looking to secure a mortgage on a property they are buying at auction.

Normally, a mortgage broker will advise prospective buyers to get the valuation done and be at the stage of a mortgage offer before even stepping into the auction room.

Another option available to those who are unable to secure a mortgage offer in time for the auction is to consider using a bridging loan.

Bridging loans are usually short-term loans that can be a good way to fund a property bought at auction until a mortgage has been secured.

Unlike a mortgage, bridging loans are usually more flexible and require fewer criteria to qualify. As well as this, a bridging loan often has a faster application process, and some can be agreed within just a few days.

Those considering a bridging loan should be aware, however, that these loans often come with a higher interest rate than mortgages. For more information about bridging loans read our guide on how they differ from mortgages, or consider speaking to a bridging loan expert, which can be found here.

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residential housing street

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