Photo by Urban Island Property

Thinking about buying a property at auction? You’re not alone.

Property auctions are becoming an increasingly popular route to buying in the UK – offering speed, competitive prices, and access to properties that aren’t always available on the open market. But with opportunity comes risk.

As experienced mortgage brokers, we’ve supported many clients through auction purchases in recent months – and we’ve noticed a rise in hidden costs, legal restrictions, and tight completion deadlines that can catch even seasoned buyers off guard.

In this month’s mortgage update, we’re sharing real examples of the challenges we’ve encountered, along with practical advice on how to prepare, what to watch for in a legal pack, and why working with the right solicitor and broker can make all the difference.

• Land Registry restrictions on any profit made from the onward sale of the property. This is a particularly restrictive condition, and in one case it required a charge on another unencumbered property owned by the client. Without that option, I’m not sure we’d have been able to complete. We didn’t even find out about the restriction until much later in the transaction – so it was only thanks to a strong relationship with a very flexible lender that we managed to get it through.

• Unilateral notices registered against the property. These must be removed before completion, but often we don’t know who the notice is in favour of, or how much the charge is for – which can cause significant delays.

• Overly restrictive completion periods, including costs for entering a notice period and shorter deadlines overall. We’ve seen auctions where the completion time is set for 12 noon, which effectively gives you one day less, as it’s unlikely you’ll complete before then. We’ve also seen very high interest rates for exceeding the timeframe – even if it’s by just an hour – and fixed penalty fees.
  

It’s worth noting that we’re encountering issues we haven’t seen in all our years of doing this (which is quite a few!), so this list is by no means exhaustive. Who knows what might crop up next week?

So, what can you do about it?

Preparation really is key – it’s all about knowing what you’re getting into. Here are some suggestions:

• Pay a solicitor to review the legal pack. This is often seen as a waste of money before you’ve bought the property, but it could literally save you thousands if they spot something that makes it unmortgageable.

• Find a good broker – ideally someone with experience in auction purchases. Be prepared to pay for a ‘business class’ service! We charge a premium for a 21-working-day timescale, but that reflects the level of work required to make it happen.

• Check that your solicitor is on the lender’s panel. We’re seeing frequent clashes here, meaning you can’t always use just any solicitor. A good broker will already know which solicitors work with which lenders, so make sure you have this in place before auction day.

• Every day counts. 21 working days isn’t a long time – particularly when you need a valuation – so do as much as possible in advance. A good broker will want to get started before auction day.

• If you’re using investor funds, prepare your investors for the level of detail required. Lenders need full transparency due to increasing anti-money laundering requirements. You’ll need to be upfront about where the funds are coming from, and act quickly.

• Have a contingency plan. We’re seeing many clients buy with tight budgets, but auctions allow very little room for error. If your valuation comes in lower than your purchase price, or the valuer estimates higher refurbishment costs, you’ll need additional funds. You may also need more to cover interest charges for delays or ‘right to complete’ fees. Operating without a contingency is a big risk!
  

I hope this helps. If you’re considering buying at auction, please get in touch well in advance so we can ensure we have the capacity to assist you properly.

Feel free to book a call if you’d like to discuss this – or anything else.

About the Author:

Ellie Broadhurst is a specialist mortgage broker working at Baya Financial in partnership with The HMO Roadmap. She works with HMO property investors throughout their journey, from clients starting on their first project through to experienced portfolio landlords and developers. Learn more about Ellie here.