Buying a property through an auction is a popular property investment strategy, as investors can often find good property deals at auctions. It is estimated that buyers can save around 10% to 30% when buying through an auction compared to using an estate agent.
However, the auction process can be more complicated and obtaining a mortgage may also be difficult. Auction properties may have condition issues that standard lenders deem as too risky to approve a loan for. Specialist mortgage brokers such as James Leighton Financial Services, can simplify the mortgage application process.
How buying property at auction works
These are the steps involved in buying a property at auction:
- Contact auctioneering companies covering the area you are interested in buying property in and register with them. They will add you to their mailing list to update you about properties at upcoming auctions and send you auction catalogues so you can find a suitable auction property.
- Arrange a viewing. We highly recommend that you view the property before the auction takes place, and if you do not have construction knowledge, arrange for a suitable tradesperson to view the property with you.
- Review the legal pack and ask your solicitor to check for any legal concerns.
- Calculate your financial requirements, including any refurbishment costs.
- Secure a mortgage or bridging loan. Auction purchases move quickly, so you will need to have funds available immediately.
- Bid for the property at auction. If successful, you will need to pay a 10% deposit straight away.
- Complete the purchase through the exchange of contracts, with your conveyancer completing the legal paperwork and financial transfers.
*Bridging Loan requests will be on a referral only basis
Can you get a mortgage for auction properties?
Yes, you can get a mortgage for auction properties, but you may have a limited number of lenders if there are risks associated with the property. For example, if there is structural damage or the property has non-standard construction materials, some lenders may decline your mortgage application. Using a specialist mortgage broker can help you to find suitable lenders who approve mortgages for auction properties.
