Buying an Investment Property at Auction Using Bridging Finance

Purchasing an investment property at auction can be an excellent way to secure below-market opportunities. However, it requires swift decision-making, careful planning, and the right finance solution. For many investors, bridging finance for auction property  is the ideal option to ensure a smooth and timely completion.

At Pyxis Capital, we specialise in providing fast, flexible bridging loans to support property investors across the UK. Whether you’re buying your first auction property or expanding your portfolio, we’re here to help you fund your next opportunity with confidence.

Why Use Bridging Finance for Auction Purchases?

When purchasing at auction, time is of the essence. Once the gavel falls, you typically have just 28 days to complete the transaction. This strict deadline often makes traditional Buy-to-Let (BTL) mortgages unworkable, as they can take weeks — or even months — to finalise.

So, what’s the solution?

Bridging finance for auction property offers a fast, short-term funding option that allows investors to complete quickly while planning for a longer-term exit. It’s particularly useful when buying properties that need work, are non-standard, or don’t meet mainstream mortgage criteria.

Bridging Finance vs Buy-to-Let Mortgages

While BTL mortgages may offer lower interest rates, they come with limitations. For example, if a property lacks a working kitchen or bathroom, has structural issues, or comes with a short lease, most lenders will not approve a traditional mortgage.

On the other hand, bridging finance for auction property are designed for speed and flexibility. They allow you to:

  • Complete auction purchases within the tight 28-day timeframe
  • Acquire properties that would otherwise be unmortgageable
  • Carry out refurbishments or improvements
  • Refinance to a BTL mortgage once the property is lettable

In summary, bridging finance acts as a short-term stepping stone, helping you secure and improve the property before transitioning to a long-term solution.

Pros and Cons of Buying at Auction Using Bridging Finance

Understanding the benefits and risks of Bridging finance for auction property is crucial before committing to this strategy.

✅ Advantages:

  • Quick access to funding, enabling you to meet tight auction deadlines
  • Greater flexibility, especially for unusual or distressed properties
  • Opportunity to add value through refurbishment or conversion
  • Increased competitiveness in the auction room, as you’re financially prepared

❌ Considerations:

  • Higher interest rates and fees compared to traditional mortgages
  • Short loan terms (typically up to 12 months), requiring timely repayment
  • Risk of losing your deposit if you’re unable to complete
  • A strong exit strategy is essential, such as refinancing or sale

What to Consider Before Bidding at Auction

Buying at auction is not something to take lightly. To reduce risk and avoid surprises, it’s essential to do your homework. Here’s what to consider:

  1. First, view the property in person or appoint someone you trust to do so. Photographs rarely tell the full story.
  2. Next, review the legal pack thoroughly. Pay attention to the title register, property searches, lease terms, and any restrictions or special conditions.
  3. Whenever possible, obtain a RICS valuation or building survey to better understand the property’s condition and value.
  4. Additionally, have a clear picture of your bridging finance costs — including interest, lender fees, legal fees, and exit costs.
  5. Lastly, secure a Decision in Principle (DIP) from your chosen bridging lender before auction day, so you can bid with confidence.

Auction House Fees and Additional Costs to Budget For

The hammer price is just one part of your total cost. In reality, several additional fees are involved when buying a property at auction:

🔸 Buyer’s Premium

Most auction houses charge a buyer’s premium, which is typically 1.2% to 2.4% of the final purchase price, or a fixed fee (e.g., £1,000–£2,000), whichever is greater. This fee is payable on top of your winning bid and is non-refundable.

🔸 Administration Fee

Many auctions charge an admin or documentation fee, which covers legal pack preparation and processing. This usually ranges from £300 to £1,200+, depending on the auctioneer.

🔸 Reservation Fee (Modern Method of Auction)

If you’re buying through the Modern Method of Auction, expect to pay a reservation fee — often 4% to 5% of the purchase price, or a minimum of £5,000. Unlike the deposit, this fee is usually non-refundable and does not count toward the purchase price.

🔸 Legal Fees

You’ll need to pay for legal representation to review the auction legal pack and manage the conveyancing process. Importantly, this should be done before bidding, not after.

🔸 Stamp Duty Land Tax (SDLT)

Stamp Duty is calculated on the hammer price (not including fees). Furthermore, higher rates may apply if the property is a second home or purchased through a limited company.

📝 Tip:

Carefully read the special conditions of sale. In many cases, sellers pass on additional costs such as legal expenses, arrears, search fees, or even unpaid council tax.

Due Diligence Checklist for Auction Buyers

Before bidding at auction, thorough preparation is essential. By taking the following steps, you can minimise risk and increase your chances of a successful investment:

✅ First, have a solicitor carefully review the legal pack, including the title register, property searches, and special conditions of sale. This will help identify any legal issues before you’re committed.
✅ Next, arrange a property inspection or professional survey. This ensures you fully understand the condition of the property, especially if it requires refurbishment or structural work.
✅ In addition, research the local area to assess comparable sales, market demand, and rental potential. This information is crucial for calculating your return on investment.
✅ Furthermore, make sure your 10% deposit is readily accessible, as most auction houses require it immediately upon a successful bid.
✅ It’s also important to investigate any planning restrictions, lease issues, or other legal complications that could impact the property’s future use or value.
✅ Finally, define a clear exit strategy from the outset — whether you plan to refinance with a BTL mortgage, sell the property post-refurbishment, or repay the loan using another asset.

Ready to Fund Your Auction Purchase?

At Pyxis Capital, we specialise in bridging finance solutions designed to meet the fast-paced demands of auction purchases. We work closely with property investors, developers, and landlords to deliver tailored funding that meets tight deadlines and unique requirements.

Our expert team can guide you through the process, from securing a Decision in Principle to completing the deal. Whether your strategy involves refurbishment, resale, or long-term letting, we’re here to provide fast, reliable finance to help make your investment a success.

👉 Get in touch today to speak with a bridging finance expert or request a Decision in Principle before your next auction –  01257543013

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