BUYING AND FINANCING A COMMERCIAL PROPERTY AT AUCTION
You’ve got your sights set on buying a property that’s soon to be auctioned. But you need a short-term finance agreement to bridge the gap between your deposit and the purchase price. How much can you borrow? And how quickly can you get the funds released?
Fail to prepare, prepare to fail
Buying a property at auction is a much quicker process than a traditional purchase, so it is important to be prepared. An auctioneer’s catalogue tends to be available 2-3 weeks prior to the auction date, so use this to your advantage.
• Make an appointment to visit the property. If possible, I would recommend taking a qualified surveyor with you. A qualified surveyor will be able to point out any structural problems or any other issues related to the state of the property.
• Read the legal pack! An auction purchase is legally binding. It is important you fully understand the scenario and what you are agreeing to. Ask your solicitor any questions if you are unsure.
• Get your finance pre-agreed. If you need help sourcing finance for this purchase, now is the time to speak to a mortgage adviser (ahem!… Hello!). It is advisable to get an agreement in principle to take with you on the day.
• Get your deposit ready. If your bid is successful you will be asked to pay a 10% deposit on the day. You are then given 28 days to find the remainder and complete on the purchase.
What you can expect from us
Applying for finance – the process
• Initial application – Call Konnect Financial on 0333 011 2208 and we’ll start searching for an appropriate lender once you have a property in mind.
• Prepare your paperwork - Before attending the auction, make sure you’ve got all the necessary documents needed to support a full loan application, i.e. auction pack, proof of identity, address and income.
• Winning bid? - If you’re the successful bidder, call to let us know soon as possible so we can get a quote for you the same day. We will then submit the full application on your behalf.
• A valuation will be instructed - Usually this will be arranged between the lender and the estate agent.
• Solicitors will be instructed. The lender will instruct their legal representative. You must instruct yours - most likely, they will be different from the lender’s solicitor.
• To-ing and fro-ing. This is our job! We’ll work with all parties – you, the lender, the valuer, the solicitors - to keep the deal on track.
• Completion. When all goes to plan, the funds will be released within the 28-day timescale.
Exiting the Bridging finance
When the time comes for you to repay the Bridging finance, you’ll have one of the following exit plans which will be assessed at the time of application:
• Sell the property to repay the loan. Perhaps you’ve carried out development works to increase the value and now you are looking to sell the property on.
• Refinance onto a commercial mortgage. If your plan is to use the premises for your own business or lease it to tenants, then you’ll need to refinance onto a longer term, more cost-effective rate. This is where we come in. Get in touch and we’ll source the right mortgage for your circumstances.
• Sale of other Investments. Lender will consider the sale of shares as well as other investments as your exist strategy.
• Sale of secondary property. You can sell wither residential or commercial property and use the equity to repay the short-term finance.
• Inheritance. If you due to receive an inheritance sum, lenders will accept this as your exit strategy.