Raising finance to buy at auction?

bridgend_girl

Just that. How is it done? Looking to buy around the £140k mark. Earnings of £33,300 PAYE public sector job. No other loans or property. Potential cash available to put some deposit or costs etc of £40k.

Is it possible and if so how?

Thanks

AnotherJoe

I would say it isn't done*.
People bidding already have the cash, so no it isn't possible in your case.

* unless you already have other properties as collateral or to release equity from

bridgend_girl

Oh dear. Thought there must be some type of loan linked to this if not a mortgage per se.

No other property in buyer's name. Could a third party act as guarentor?

G_M

You need to have all your finance in place before you bid. No good bidding, winning, then applying for a mortgage (or other loan) only to have your application delayed or worse, refused - leaving you with penalties for not completing on the contract.


A Mortgage in Principle is not enough. You need a firm mortgage offer.


Or, like most people at auctions, you need cash in the bank.


There's a reason most people use estate agents.......

G_M

bridgend_girl wrote: »

Oh dear. Thought there must be some type of loan linked to this if not a mortgage per se.

No other property in buyer's name. Could a third party act as guarentor?

If the 3rd party is willing and able to produce the required £140K within 28 days of the auction- no problem.

gingercordial

Standard auction conditions are completion within 28 days of hammer fall. Even if you were very sure of getting a mortgage offer, you'd be betting on having it come through that quickly...

I have only bought commercial property at auction with cash in the (company's) bank.

SmashedAvacado

there are specialist lenders that attend auctions with marketing material you could perhaps speak to.

The key thing beyond affordability (which you will be able to be clear on in advance of bidding) is the condition of the property and its legal title / status.

foxy-stoat

bridgend_girl wrote: »

Oh dear. Thought there must be some type of loan linked to this if not a mortgage per se.

No other property in buyer's name. Could a third party act as guarentor?

I dont think Amigo lend £100K out these days but on 49.9% interest they would be rubbing their hands together.

You need cash really to make it at auction - if you can find a few people will good credit willing to pull £100K out of credit cards, money/balance transferring you could do it but it would require all to have a good share of the profits as it could get very expensive very quickly.

Your better off just looking in Estate Agents windows and Rightmove for your first property.

bridgend_girl

Thanks. I know that a mortgage offer is not enough. The guarantor could 'guarantee' the sum but not produce cash or I wouldn't need a guarantor. I know that sales needs to complete in 28 days. What I'm asking is there a way to have a loan in place prior to bidding?

I've contacted a few finance companies but am awaiting call backs etc. I have bought and sold many houses but specifically want to buy from an auction this time and have no experience ---yet.

Not giving up yet lol.

hazyjo

Remember a lot of properties being sold at auction are unmortgageable - meaning something may be wrong with them (non-standard construction, short lease, or probs like subsidence, fire damage, etc). That would make it very hard to sell them on, so tread very carefully!


You could have a loan in place (AFAIK) if that would give you the cash, but I can't imagine anyone lending you £100k! Not unless it's a mortgage...


You have to work out if it's worth the hassle - add buying costs, renovation costs, loan interest, selling costs, etc (if you're selling it on) and then make an informed judgement.


I would NEVER buy at auction with a mortgage. Way too high a risk for everyone involved, let alone trying to complete within a month!

eddddy

If you google 'Auction Finance', you will find loads of companies advertising this.

As SmashedAvacodo says, they also attend auctions touting for business.

They're expensive, so you need to be pretty clear about your 'exit strategy' - e.g. Maybe you're borrowing for just long enough to do the minimum refurb to get the property mortgageable, then you'll get a mortgage and pay off the finance.

And it will be a commercial loan, not a consumer loan - so no consumer protection. - e.g. The contract could say that if you miss just one payment, they can immediately repossess.


So they'll be less concerned about your income, but more concerned about 'loan to value' etc - i.e. If they repossess and stick it back in an auction, are they guaranteed to get their loan + interest + expenses back?