Auction Finance Problems Strategies for Unforeseen Challenges
Auction Finance Problems can be just around the corner as It can be easy to get drawn into the Auction Finance process when looking to purchase a property at Auctions. Before you know it, you’ve started putting down deposit money and instructing solicitors, but you must spend the money in the right areas, as aborting an auction finance deal can be costly.
When it comes to heading of Auction Finance Problems I have come up with 8 key points to try and help protect would be property buyers.
- Not all Auction Finance clients & brokers are the same
It’s tempting to get the legals rolling, as shown; your 10% auction deposit has been paid. You will likely be pushed by the Auction House, Vendor, Your Solicitor, and the Auction Finance Lender to get this going. The process is usually a commitment “undertaking” given by your Solicitor to the Lender’s Solicitor that you will pay their fees irrespective of whether the Completion happens.
First, you must take stock of your “Status approval” for the funds. Every Auction Finance Applicant will be scrutinised; they will look at you, the Company structure you are buying under, credit profile, deposit source, income, building insurance, carry out an interview, and trawl over the property they are lending against.
Things can go wrong, and there are always Auction Finance Problems; for instance, has the property got a “good title”! Is the area subject to flooding? Were you aware you have a CCJ for a parking offence? In short, you must strike the right balance between approval on the big points and the auction completion deadline.
Your Property Finance Broker, such as Niche Advice, can guide you on the main points to tick off. And be mindful that your legal costs could run into thousands of pounds as soon as you give the undertaking. So, your first point, of course, should be to discuss your needs with a professional finance broker who understands not only the good points but also the pitfalls of going down this route. - Auction Finance Problems to do with Legal Packs
Do not, under any circumstances, rely on simply browsing the auction pack for your answers. If the Vendor is going to conceal a defect with the property or title, the best place to bury this is in an auction environment where bidders can get impulsive and where there is time-sensitive pressure to commit.
- Auction Finance Problems & Survey
Ensure you obtain a Level 3 survey ahead of the auction and allow yourself at least a week to question the Surveyor on their findings/issues, such as recommendations on further in-depth investigations or specialist reports.
3 Regarding a 28-day auction purchase, it’s preferable to use specific short-term auction finance as it can be turned around more efficiently than mortgages. Ask your property finance broker to look for auction finance lenders who can consider automated desktop valuations (AVMs). Many do for auction purchases with the support of either a video walkthrough or photos. This protects your outlay and will be quicker and more cost-effective. - Auction Finance Problems & Contractors
Do your prep. Sound out Contractors for any work you plan to do and ensure your schedule is costed and deliverable. Does the property need special reports? for example, damp and dimmer reports. Are there any signs of asbestos? What about the construction type? Can you see any physical problems the surveyor may have when looking at the property?
One example is clients say I’m actually gonna do quite a lot of the work myself, so the costings will not be reflecting of market rates often. Lenders will take into account that you will do the work yourself; however, they would want comparisons from professional firms doing the work when it comes to the schedule of work. - Auction Finance Legals Problems
Check whether the Lender offers “dual representation” legals. This saves you from employing separate solicitors and the lender running theirs to check many of the same legal points. Sure, you lose an element of independent advice, but the cost savings and efficiency can help, particularly in auction finance cases. Your Property Finance Broker will do a disservice by not mentioning or sourcing this option. If you have your own firm of legal representatives, make sure they are well-versed in using bridging finance and auction finance facilities because generally, they are a lot more complicated than your average conveyancers in case many cases tend to fall around. legals. So it’s so important you choose a competent firm to avoid Auction Finance Problems I would say this is probably one of the most critical aspects of the whole process.
- You have to be on top of things.
Don’t relax. An auction purchase typically requires your daily involvement. The deadline may have some flexibility, depending on the Vendor. Still, failure to hit the date will inevitably result in a lump sum payment and/or daily interest charges.
- Contingency & your plan B
A Contingency fund of 10% to 15% is the norm, but if you plan correctly, you should not need to delve into this, right? If you do, you are simply shaving the profit on the project.
- Protect yourself
Lastly, the Auction House and Lenders will survive because they are large organisations. You need to make sure you are putting your interests first and minimising the risks. If you want someone to be by your side, consider Niche Advice. We have a wealth of experience within the bridging and Auction Finance sector.
If you are looking to purchase a property at auction or have had Auction Finance Problems in the past, why not give us a try? We know what we’re talking about and have helped many clients secure properties at Auction.
