Short-term finance and the auction process
Donna Wells, Director at F4B
Property auctions can be a great place to grab a property-related bargain. However, many people do not have the cash reserves to complete such a purchase and be able to make the types of improvements that are generally required. Provided a robust exit route is in place on completion of any works and due diligence has been done, bridging finance can fill this gap and help generate good returns on the investment. And a good packager with strong specialist expertise in this sector can play a hugely important role in sourcing the right funding terms from the right lender when speed really is of the essence.
Property auctions have also had to evolve over the past 12 to 18 months and the modern method of auction has been adopted by auction houses and estate agents across the UK. This offers the speed, transparency, and security of a traditional auction but with an extended completion timeline of within 56 days.
Even though timelines are being extended through modern auction methods, additional market complexity and lending restrictions mean that 56 days can still prove to be an extremely short timeframe which can often cause issues when arranging any funding and from a legal perspective. And with many mainstream lenders still unable, or unwilling, to accommodate such tight deadlines then short-term finance can often prove a viable and responsible solution.
There has been an exponential rise in demand for property auctions in recent times, driven by increasing consumer confidence and desire for alternative buying solutions that deliver speed, security, and results. Many online auctions have reported record-breaking numbers of bids and activity in H1 2021 and technology will continue to change consumer needs in addition to how property is sourced, viewed and purchased. The auction process is an age-old one but it’s certainly not immune to the impact of technology and this will be an interesting trend to follow going forward.