How to Buy Property at Auction

Property auctions offer several advantages:

• Below market value - Properties often sell 10-30% under market price
• Speed - Exchange happens immediately, completion in 28 days
• Certainty - Once the hammer falls, the sale is legally binding
• Variety - Repossessions, probate sales, and unusual properties

However, you need finance arranged before bidding. Traditional mortgages take 6-8 weeks - too slow for the 28-day completion deadline.

Miss the deadline and you lose your 10% deposit plus face potential legal action. This is why having finance pre-agreed is essential.

Bridging loans are designed for speed. Here's the typical process:

1. Pre-approval - Get a Decision in Principle before the auction
2. Win the bid - Pay your 10% deposit on the day
3. Formal application - Submit full details to your chosen lender
4. Valuation - Lender instructs a surveyor (often within 48 hours)
5. Legal work - Faster than mortgages as fewer checks required
6. Completion - Funds released, typically within 2-3 weeks

• Decision in Principle - From a bridging lender, not a mortgage lender
• Proof of deposit - 10% of maximum bid price in accessible funds
• Solicitor on standby - Ideally one experienced in auction purchases
• Exit strategy - How will you repay? Sale or refinance?
• Legal pack review - Have your solicitor check this before bidding

For a £300,000 auction purchase with 75% LTV bridging loan (£225,000):

Total upfront costs: approximately £8,000 plus monthly interest. Compare this to potentially saving £30,000-50,000 on purchase price.

1. Not reading the legal pack - Hidden issues can be costly
2. Relying on a mortgage - They simply won't complete in time
3. Overbidding in the heat of the moment - Set a maximum and stick to it
4. Forgetting buyer's premium - Usually 2-3% on top of hammer price
5. No exit strategy - Know how you'll repay before you bid