Auction finance
Auction finance
Written by Chris Canham, commercial finance broker with nearly 30 years in financial services. Last reviewed .
Funding built around the 28-day completion deadline, arranged before the hammer falls rather than after it.
What it is
Finance that keeps pace with the auction calendar.
An auction purchase is not a private treaty sale with a faster timetable. When the hammer falls you have exchanged contracts. You pay a 10% deposit that day, and the contract usually requires completion within 28 days – sometimes 20. There is no chain to wait on, no renegotiation after survey and no room for a lender who needs six weeks to instruct a valuation.
That is why a standard term lender rarely works for auction lots. Auction finance is short-term bridging, arranged so that the valuation, the legal pack review and the underwriting can all happen inside the contractual deadline – and ideally before you raise your paddle.
A decision in principle in place before the catalogue closes is worth more than a cheaper rate found after the sale. If you fail to complete on time, you can lose your deposit and may be liable for the seller's losses and costs under the auction conditions. Getting the funding lined up first is what protects the 10%.
Use cases
When auction finance is the right tool.
Unmortgageable lots
Properties with no kitchen, no bathroom or structural problems that a term lender will not touch until the works are done. Bridge the purchase and the works, then refinance once the property is habitable.
Modern method of auction
Reservation-fee sales with a longer timetable, typically 28 days to exchange and 56 to complete. More time, but the reservation fee is usually non-refundable, so the funding still needs to be certain before you commit.
Below-market-value buys
Where a lender will advance against the purchase price rather than the higher valuation, and the six-month ownership point many term lenders apply before they will refinance on the new value.
Commercial lots
Shops, offices and mixed-use lots where the tenancy position is unclear on day one. Lenders want the leases, the rent record and a realistic plan for any vacant space.
Land and unusual titles
Short leases, flying freeholds, missing rights of way and other title defects that surface in the legal pack. Some lenders will proceed with indemnity insurance; others will not lend at all.
Portfolio lots
Buying several lots in one catalogue and funding them under a single facility, with one valuation instruction, one set of legals and one exit plan.
Indicative terms
How auction facilities are usually structured.
| Measure | Typical position |
|---|---|
| Monthly interest rate | Priced as bridging; set by the lot, the legal pack and the exit |
| Maximum LTV (of purchase price) | Lower of purchase price and valuation for most lenders; more with additional security |
| Time to completion | Inside the auction deadline when terms are agreed before the sale |
| Term length | Short term, sized to the works and the exit |
| Arrangement fee | Usually a percentage of the loan, added to the facility |
| Pre-approval validity | Agreed in principle before you bid, subject to valuation and legals |
Indicative only. Auction lots are priced on the legal pack, the condition of the lot and the exit.
Go deeper
Auction finance is bridging, priced for a deadline.
Auction finance is a bridging loan with a compressed timetable. The pricing, the security and the exit work the same way as any other bridge – the difference is that the deadline is set by the auction contract, not by you. Read the full bridging guide for how rates and fees are built up, and use the bridging cost calculator to see the total cost of a facility before you bid.
Questions
The things people ask first.
Bidding on a lot in the next catalogue?
Send the lot number and the legal pack, and you will get an indicative decision back before the sale.
We aim to respond the same working day.
Or book a 30-minute call at a time that suits you.