Deal of the Month May 2021: Downvalued Auction Purchases and Family Issues

Thousands of properties are bought and sold at auction every year in the UK, and we have helped many purchasers secure the necessary short-term finance they need to see their deals through to fruition. However, not all of these deals are straightforward. That was certainly the case with our Deal of the Month for May 2021.

About the Deal

We were recently approached by a client who came across our website for a bridge loan to cover the cost of an auction purchase. They had the winning bid to purchase some houses, so had just 28 days to complete or lose their deposit. However, unfortunately, both properties purchased were downvalued.

Downvaluations can be tricky, especially when there is a tight timescale like this. To compound the issue, the borrower hoped to use an existing property as collateral, but it was under renovation at the time.

Lending options were greatly reduced, but we worked closely with the lender and borrower to come up with a mutually beneficial solution.

Then came further complications. It turned out that this project was to be family run. The mother was to take out the loan to fund the property venture for her son.

So, as the parent would receive the money, but would not be the owner of the onward purchase, the deal became regulated and additional paperwork had to be produced, agreed and signed.

The lender’s solicitors also weren’t on their panel to deal with a regulated loan, but they decided they would proceed due to the tight time constraints.

Thanks to our hard work and perseverance, a solution was found, and the client was able to complete in time for their auction deadline. They now have a 12-month bridging loan with a gross debt of £160,000, so their foray into property can begin.

Are You Considering an Auction Purchase?

If you’re considering purchasing a property at auction and will require a bridging loan to cover the costs, we’re here to help. Get in touch with our team of property finance brokers to discuss your options.

Bridge finance is our bread and butter. However, as seen by this deal, it is important to do your research and be transparent about your particular case up front.

We would always recommend reading the property’s legal pack and speaking to a local expert, if you’re unfamiliar with the area, before the gable goes down.

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