Your guide to auction finance and auction properties
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Auction Finance by MCA Finance Limited
MCA Finance Limited is a specialist finance brokerage regulated by the financial conduct authority (FCA). For further details of MCA Finance Limited please visit www.mcafinance.net.
This website is dedicated to auction finance and the concept of buying a property at auction.
If someone needs to sell a property quickly, they are likely to consider selling through a property auction.
Properties sold at auction are usually marketed at a discounted price or offer the buyer the potential to add value to the property by either completing works or making changes to the title.
For this reason, property auctions are often used by property investors or people trying to buy a new home for a price lower than those listed on the open market.
We understand that buying property at auction can be a great opportunity however with over 8000 property auctions held each year, they can also be time consuming, competitive, and stressful.
We are here to explain the auction buying process, work with you on your strategy and arrange tailored finance to help you achieve your goals.
You will have one dedicated advisor who will guide you through the process from start to finish. We also have relationships with excellent accountants, solicitors and surveyors should you need additional professional advice.
Benefits of buying at auction
Guide to auctions
Property auctions can be very exciting. You might have found the perfect property and feel you have a good chance of winning the bid. Make sure you don’t get to carried away. It’s vital you understand the risks associated with buying a property at auction.
If you have a successful bid at a property auction you have legally exchanged on the property. This means you are legally obliged to buy the property and the vendor is legally obliged to sell at the agreed price within an agreed time frame.
This time frame can vary from auction to auction. If you fail to purchase the property you may lose your deposit and could also be pursued for further damages. This breach of contract could cause you significant financial loss.
The property is ‘sold as seen’ meaning you cannot condition the offer subject to finances or valuation reports.
It is very important to be well informed and well prepared before you consider making a bid on a property.
Our exclusive guide
Be prepared early.
Auction properties are listed well in advance of the auction date. This gives you ample time to research the property and its location. You can put together a plan which includes:
- What is my intention with this property? Will I live there, or will this be an investment?
- Will works or improvements be needed? If yes what is the breakdown of the works required? How long will the works take? Who will complete the works? What is the likely cost? What will the value / rental income be once the works have been completed?
- Should I buy the property in my personal name or via a LTD company? There are pros and cons of both options, we recommend you seek tax advice from a qualified professional.
- Can I add value to the site in any other way? Perhaps you could turn a multi-unit freehold block of flats into separate leasehold units? Perhaps you could convert a commercial building into a residential dwelling? Maybe you could extend a property and turn it into an HMO – there are lots of strategies to explore.
Understand your budget.
- What is the maximum price I will pay for this property? Why is this my maximum?
- Can I fund the purchase with cash savings, or will I need Finance?
- How will I fund the works? Again, finance options may be available.
What third party advise do I need before I make a bid? This could include:
- Advise from a property surveyor to check the condition of the building and its market value.
- Advise from a solicitor to check the legal pack, ensure there are no immediate issues with the property title.
- Mortgage advise – call 01202 806082 or complete the call back request form.
Auction Finance
Cash buyer
Do you have sufficient funds to purchase the property in cash? Are you fully aware of the auction fees, stamp duty and other purchase related costs? Could some of this cash be better used elsewhere?
Re-mortgaging existing assets
Could you raise the money to buy an auction property by refinancing property(s) you already own?
Bridging finance
This is one of the most common methods of funding an auction purchase. A detailed guide is provided below. The area of bridging can be complex and is very specialist, please do call us to ensure you fully understand the details.
Call 01202 806082
Bridging Loans
A bridging loan is a short-term mortgage designed to help when:
- Funds are needed quickly.
- A property is in poor condition or where the intent is to complete improvements to the property.
- The property title needs changing.
If a property is not typically mortgageable (no working kitchen, bathroom, poor condition etc) then a bridging loan may be the right solution.
With bridging loans:
- You do not have to make monthly interest payments, instead you pay the interest at the end once you have either sold the property for a higher price or re-mortgaged with a long-term lender.
- You can have the mortgage for a little as 1 month, with a maximum term typically between 12-18 months (some exceptions do apply)
- You can typically borrow up to 75% – 80% of the property value, sometimes higher depending on the property type, works required and additional security you have available.
- All credit status considered.
- All property types considered.