What you need to know if you have a client buying at an auction
Darrell Walker (pictured), head of sales at InterBay Commercial
Whether they’re looking for a commercial or residential property, landlords can often secure a good deal when buying at auction. However, due to the timescales involved it can be a trickier endeavor than other routes to purchasing a property. Ahead of buying at an auction there are a few actions that landlords should consider.
- How do people find out about the auctions?
You can find out when there is going to be a property auction through the websites of some of the bigger auction houses, such as Savills or Allsops, or through local estate agents. Ahead of any sale, the auction house will publish a catalogue of properties up for sale. From this point onwards, you could have from two to four weeks until the sale takes place.
- Is the property in good condition?
It’s important to view the property at least once. Consider taking along a builder or an architect during this visit to ascertain any work that would need to be done to the property and make a judgement on the value of the property once renovated. Once certain about buying, consulting a surveyor or valuer would be the next step which would give a good idea of what to bid.
- Are there any hidden fees?
A conveyancer will help with the legal process and be able to make sure that all the legal information provided by the auction house is correct. This will include checking the terms of sale to ensure there are no surprises that could add on extra costs, such as having to pay the seller’s legal fees.
- Do you have finance in place?
Typically, on the day of the auction the buyer will have to put down a deposit for the property, and then there will be a set period of time in which to pay for the rest. This means that the buyer will need quick access to finance.
It can be tricky to get a mortgage within this timeframe, so knowledgeable brokers will often recommend a short-term lending option. The process to secure short-term lending finance can be swift as lenders are able to act more flexibly to provide their clients with the funding they need for time pressured situations.
Brokers will be able to add additional value to their clients here. Forming good relationships with those specialist lenders able to provide short-term lending options will also be key.
Case study: InterBay Commercial helps Ingard deliver early Christmas present for new client
InterBay Commercial, part of specialist lending group OneSavings Bank, was approached by Ingard, a leading mortgage network, on behalf of a new property developer client. The client had purchased a three-bed semi-detached property (valued at £185,250) and required an appropriate short-term lending solution in order to refurbish the property quickly, with the aim to sell on. They then planned to buy a second property through auction.
Having developed a close working relationship over many years, Ingard approached InterBay Commercial. From receiving the valuation fee from the client on 17 December, InterBay acted quickly and an offer was made by 20 December. Once reviewed by the solicitors, the purchase was completed by 15 January.
As soon as completion had taken place, the client completed a refurbishment of the property and immediately received an offer from a buyer. Due to the fast transactional process and service received, the client promptly applied for a second bridging loan to fund their next auction property development ahead of time.