When the hammer falls at a traditional property auction, you have exchanged contracts. The 10% deposit is payable that day, and completion is normally twenty-eight days later. There is no cooling-off period, no subject to survey, and no route back if your funding falls through.
That is why auction finance is arranged before the auction, not after it. Everything in this guide follows from that single point.
What you are actually committing to
At the fall of the hammer you are legally bound. If you fail to complete within the contractual period you will normally lose your deposit, and you can be liable for the seller's costs and for any shortfall if the property is resold for less.
A 10% deposit on a £200,000 lot is £20,000. That is the cost of turning up without funding in place and hoping.
The modern method of auction is different: typically 28 days to exchange and a further 28 to complete, with a reservation fee rather than a deposit. There is more room, but the funding approach is the same — you simply have a little more of it.
Why mainstream mortgages rarely work
Two problems.
Timing. A residential or buy-to-let mortgage application normally runs six to ten weeks from application to offer. Twenty-eight days is not enough, and a mortgage offer is not binding until issued.
Condition. Much of what appears at auction is there precisely because it is difficult to mortgage: no kitchen, no bathroom, structural issues, short leases, non-standard construction, tenanted properties with regulated tenancies. A valuer acting for a mainstream lender will often report the property as unsuitable security.
Bridging solves both. It funds on the basis of what the property is and what it will become, and it completes to the timetable.
The week-by-week plan
Three weeks before the auction: review the catalogue
Identify the lots you are interested in. Download the legal pack for each one — it is free and available before the auction — and have your solicitor review it. The legal pack is where the problems live: tenancies in place, title defects, missing rights of access, onerous covenants, service charge arrears.
Set a maximum bid for each lot, based on your own valuation and the finance available. Write it down.
Two weeks before: get the funding agreed in principle
Speak to a broker. Give them the lot details, the legal pack, your maximum bid and your exit plan. At this point a lender can be identified and the case can be pre-packaged: identification, proof of funds for the deposit, company documents if applicable.
Crucially, your broker will confirm the loan the funding supports, which sets your real maximum bid. Lenders size the loan against the lower of the purchase price and the market valuation, so overpaying does not increase what you can borrow — it increases the cash you have to find.
One week before: instruct your solicitor and view the property
Appoint a solicitor who has done auction purchases before. Ask them directly. A conveyancer learning bridging on a 28-day deadline is a risk you do not need.
View the property if you possibly can. Photographs in a catalogue are chosen to sell. If viewing is impossible, factor a larger contingency into your works budget.
Auction day: bid to your limit and stop
The single most expensive mistake in auction buying is bidding past the number you worked out when you were calm. The funding does not stretch because you got competitive in the room.
The day you win: instruct everything
Tell your broker immediately. The valuation should be instructed that day, the solicitor should have the signed contract and memorandum of sale, and the lender should have the case.
Days 2 to 28: manage the critical path
Valuation inspection and report. Legal work and searches — ask early about search indemnity insurance, which removes weeks in slow local authority areas. Then completion, a few days before the deadline rather than on it.
How much will you need in cash?
More than people expect. On a lot bought for £200,000:
| | | |---|---| | Deposit on auction day (10%) | £20,000 | | Stamp duty (varies by circumstances) | Check your position | | Balance not covered by the loan | Depends on LTV | | Valuation and legal fees | £1,500 to £2,500 | | Works budget before any drawdown | Your whole schedule of works |
That last line catches people out. Where a lender funds works, it is almost always in arrears: you pay for a stage, the lender inspects, and then reimburses. You need enough working capital to fund the first stage yourself.
What the lender will want
- The auction catalogue entry and the legal pack
- The signed memorandum of sale, once you have won
- Photo ID and proof of address for every borrower
- Evidence of the deposit already paid and its source
- A costed schedule of works, if you are refurbishing
- Your exit: an agent's appraisal for a sale, or a decision in principle for a refinance
- Your track record on similar projects
Most of this can be assembled before the auction. That is the whole point.
Common mistakes
Bidding without funding agreed. The most expensive mistake available at an auction.
Not reading the legal pack. A tenancy you cannot end, a missing right of way, arrears attached to the title — all discoverable in advance, all disastrous afterwards.
Assuming the guide price is the value. Guide prices attract bidders. They are not valuations, and lenders will not treat them as such.
Forgetting the property may value below the hammer price. If you pay £220,000 for a lot that values at £190,000, the loan is sized against £190,000 and you fund the difference.
Underestimating the works. Auction stock is at auction for a reason. Build in a contingency of at least 10%, and view the property if you can.
Using a conveyancer who has never done this. Twenty-eight days does not allow for a learning curve.
Planning a refinance exit without checking seasoning rules. Many buy-to-let lenders will not lend against an improved value for six months. Confirm the rule before you set the bridging term.
Worked example
A three-bedroom terrace, guide price £150,000, no functioning kitchen or bathroom, vacant for eighteen months.
You value it at £185,000 in current condition and £230,000 after £25,000 of works. Your maximum bid is £175,000.
You win at £172,000. The lender sizes against the lower of price and valuation — the valuation comes in at £180,000, so the price governs. A 70% gross facility on £172,000 gives roughly £120,000 gross, releasing about £116,000 net after fees. You fund the £52,000 balance plus stamp duty, fees and the £25,000 of works from your own resources.
Twelve months at typical rates costs roughly £15,000 to £18,000 all-in. The works complete in fourteen weeks, the property is let, and at month seven you refinance onto a buy-to-let mortgage at £230,000, repaying the bridge and releasing your capital.
That is the model working. It only works because the funding was arranged before the bid, and because the numbers were set when nobody was in a room with a gavel.
Before your next auction
If you are watching a lot, get the funding position confirmed first. Send us the details — the lot, your intended bid and your exit — and we will tell you what the funding supports before you commit to anything.
There is no charge for that, and no credit check involved in giving you an answer.
Read more about how we handle auction bridging, or check the figures for yourself in the bridging loan calculator.