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What is Auction Financing?

Apr 18, 2022
auction loans

Auction Finance is a type of short-term funding, typically a bridging loan, designed for all types of property. When buying at auction you typically have 28 days to pay, therefore auction finance is a great tool to have as it is extremely fast.

Auction finance offers individuals who are seeking to purchase property from auction houses, administrators liquidators, and distressed sellers a quick method to secure it. When going into a property auction, it’s important you go over both the confidence and the assurance of knowing that you have the finance in place to complete any purchase you make.    

real estate auction

While auction finance carries a greater interest rate, however with an auction loan you gain confidence, knowing that the money will be there if you need it. Having that finance in place at the outset and before the auction means you can go there; you can bid with confidence and you don’t miss out on the opportunity of not being 100% certain you complete the purchase. It also removes a lot of stress after the auction of running around and trying to meet that 28-day auctioneer deadline set by the auction house.

How does Auction Finance usually work?

It’s agreed in advance. So it’s based on the lot and perceived values. Typically, you can borrow 70 to 75% of property value. (This typically includes the interest that’s rolled up during the period of the loan). So, what you need to put down is probably a 30-35% deposit the more you put down the cheaper finance gets. Usually, between 3 to 12 months but can go longer.  

providing auction bid deposit

Once the property or properties have been researched and a business plan has been prepared. The analysis of the comparative market must be thorough so as not to overestimate the willing price. You will typically need to provide a deposit of around 10% of the cost of the property on the same day (high-risk properties will require more). 

research the auction market

We can get the finance agreed based on the targeted property, so you’ll know, you’ve got the finance behind you to complete those purchases and you also know how much finance is available. It’s a great tool to have in your toolbox. Once bidding starts you will place your bid and if the auction is won, then the required financing process begins to obtain the necessary terms on your behalf, secure the property and finance the necessary work.

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