Briding & Commercial continue:
"According to Countrywide, four out of five properties are now sold on the day at most auctions, compared to last year when less than half of the offering would be snapped up.
However, the flood of new investors who have embraced the auction have been warned that bidding on these distressed properties is not always the simplest way to bag a bargain – especially when banks and building societies, who can take months to process mortgage applications, need to be called upon at short notice.
"Bridging lenders have reported that banks are becoming more and more hesitant to lend on properties sold at auctions, as they have often been left uninhabited or require some renovation work, causing them to be downvalued by cautious valuers.
"This can present a tricky situation for the property investor who has already paid the deposit on an auction property, but has been left high and dry by mortgage lenders backtracking on the agreement in principle.
"Bridging finance has always been linked to buying property at auction, but as banks increasingly drag their heels over new lending, short term loans have taken on an even more central role in the auction house.
Maeve Ward, from bridging lender Link Lending, says:
“We receive around 25 enquiries a week from investors looking to purchase properties at auction, as traditional lenders are often unable to process a mortgage application in the 14-28 days that buyers are given to complete the transaction.
“Most investors will look at the auction catalogue before the date of the auction and do their research, setting themselves a maximum threshold before coming to us. We can then provide them a quote in principle, which they take to the auction giving both the auctioneers & the client the confidence that the transaction is going to complete subject to satisfying all underwriting terms.
“The main benefit of using bridging finance in buying an auction property is speed. It will never be the cheapest option, but one which can be commercially correct in securing an opportunity in the short term which might otherwise have been lost.”
