Buying a Development Site at Auction
Buying a property or development site at auction can be a great way acquire a site but having your specialist auction finance organised early is very important.
In the event that you are successful with a winning bid then you will exchange contracts immediately and have to pay a 10% deposit. There will be a legal obligation to complete contracts within 28 days (or whatever timescale is determined in the contract which may be sooner!) and this is why specialist auction finance comes into its own.
Consequently, before committing yourself to a purchase at auction you should ensure that you have an agreement lined up with a specialist auction finance provider. Specialist auction finance may also be referred to as bridging loans or bridging finance. This is because bridging loans are organised to be provided quickly and drawdown within 28 days. There are many specialist auction finance providers whom will offer short term facilities together with fast drawdown.
The rates from such specialists will vary but, like so many aspects of property finance, the lowest rate may not necessarily be the best for your circumstances. With an agreement in principle you can start your search for potential sites and remember that property auctions will often be promoted at short notice and there will usually be strong interest.
In the event that you are successful with a winning bid then you will exchange contracts immediately and have to pay a 10% deposit.
There are, of course, many estate agents providing property auctions and Auction House is an example worth checking out. When you have found the perfect property to buy at auction then do your assessment very carefully and understand the total likely costs, any aspects that may affect the project such as planning matters. Of course, be realistic with expectations of the final GDV by getting plenty of advice from local estate agents or by formal valuation. With an agreement in place with your specialist auction finance provider, you can then bid with confidence but stick to your budget and do not get too carried away!
When assessing your chosen target property or site, do your homework too on the legal pack. Buying blind is never recommended! Property auctions can provide some very interesting opportunities that may deter non professionals or those for whom a regular domestic mortgage may not be suitable.
Developer Money Market makes it easy to compare property development finance and apply for a loans all in one place. Try our service today!