Why Auction Finance Demands a Different Approach

For many investors, auctions are an attractive way to secure property—guide prices can look competitive, competition is transparent, and completion is rapid. But the speed that makes auctions appealing is also what makes them risky. Unlike a private treaty purchase, contracts are exchanged as soon as the hammer falls. Buyers usually have 28 days (sometimes less) to complete.

If you cannot meet the deadline, the consequences are severe: you may lose your deposit, incur penalty costs, and in some cases be pursued for shortfalls if the property is resold at a lower price.

This unforgiving structure is why auction finance requires planning, preparation, and realism. At Willow Private Finance, our role is not to guarantee outcomes—no broker can do that—but to give clients the best chance of completing on time by ensuring funding options, legal risks, and exit strategies are understood and planned for in advance.

The 28-Day Journey: What Really Happens After the Hammer Falls

When the gavel comes down, the timeline is short and inflexible. Understanding what happens in each stage is essential for reducing the risk of delays.

Day 0–3: Immediate Actions

The priority is to secure your finance facility and instruct professionals without delay. A decision in principle with a specialist lender will help, but it’s not a binding offer. A valuation must be instructed, and your solicitor must start on the legal pack straight away. Insurance cover usually needs to begin from the moment of exchange.

Day 4–10: Valuation and Legal Reality Check

Guide prices are marketing tools, not a reliable reflection of what a lender will value the property at. Down-valuations are common at auction. This is also the stage when legal issues emerge—restrictive covenants, short leases, defective titles, cladding, or Section 20 notices. Many of these can be managed, but they almost always extend timescales and affect lender appetite.

Day 11–20: Proving the Exit

Bridging loans are the backbone of most auction purchases, but they are temporary. Lenders will want to see how you intend to repay. That could be by refinancing to a term mortgage, or by selling. Both require evidence: income documentation for term lenders, rental coverage calculations for buy-to-let, or resale comparables for sales. Exit planning isn’t an afterthought—it’s the point on which the bridge either works or fails.

Day 21–28: Choreographing Completion

Even when funding is agreed in principle, lenders may impose conditions. Insurance must be in place, works schedules might need sign-off, and final legal undertakings must be completed. At this stage, success is less about finding new options and more about managing the moving parts—solicitors, valuers, lenders, and clients—in parallel so the deal is ready before the deadline expires.

Lender Expectations: What You’ll Need

Auction bridging lenders move faster than mainstream banks, but their requirements remain strict. Buyers should expect to provide:

• Identification and AML checks completed at the outset.
• Proof of funds for deposits, fees, and any gap between purchase price and valuation.
• A full legal pack review highlighting potential risks in a lender-friendly summary.
• A valuation brief that explains not just the current state of the property but the intended use and exit strategy.
• A works plan if refurbishment is required, with costs, contractor details, and a contingency allowance.
• Exit evidence, whether that is a refinance with a term lender (supported by income or rental coverage documentation) or a sale backed by market evidence.

The key message is that lenders want clarity and realism. They know auction properties often come with issues; what matters is whether those issues can be managed within a timeframe that supports the exit.

Common Pitfalls at Auction

Over-Reliance on Guide Prices

Guide prices often bear little resemblance to valuation figures. A property marketed at £200,000 may be valued at £180,000 for lending purposes, creating a funding gap that buyers must cover in cash.

“Unmortgageable” Properties

Properties without kitchens, bathrooms, or with severe disrepair are usually considered unmortgageable by high-street lenders. Buyers who rely on term mortgages risk running out of time. Specialist bridging is often the only way forward, provided the exit route is credible.

Legal Pack Surprises

Legal packs can hide restrictive covenants, defective leases, or unresolved disputes. These can prevent completion or force last-minute restructuring. Pre-auction legal reviews are essential, but even then, timing is tight.

Ignoring the Exit

A bridge without a realistic exit is not a solution. If a refinance depends on income evidence that cannot be produced, or if the property’s intended use (such as HMO conversion) requires permissions not yet obtained, the deal may stall.

Scenarios

Short Lease Flat

A client secured a London flat at auction with only 62 years left on the lease. Most lenders refused, but by arranging a 70% bridging facility and initiating a lease extension immediately, we created a pathway to refinance onto a buy-to-let mortgage once the lease term was extended.

Uninhabitable House

Another client purchased a property without a working kitchen or bathroom. Mainstream lenders considered it unmortgageable. We arranged a refurbishment bridge, ensured contractors were lined up, and prepared evidence for a term lender to refinance once the essential works were complete.

Non-Standard Construction

A property built with non-standard materials would not have qualified for a high-street mortgage. By evidencing the certification and working with a specialist lender, we secured a bridge that allowed the purchase to complete, with a view to refinancing once works were finished.

Cost Considerations

Auction purchases involve more than the hammer price. Buyers must budget for:

• Arrangement and interest costs on the bridging loan.
• Legal fees (both buyer’s and lender’s).
• Valuation and survey costs.
• SDLT, including surcharges for additional properties.
• Professional fees for contractors, insurance, and any required indemnities.
• Exit costs, including further valuations and product fees for term mortgages.

At Willow, we model these costs at the outset so clients can assess whether the return still makes sense once the full financial picture is included.

Willow’s Role in Auction Finance

We cannot control solicitors’ timescales, lenders’ underwriting decisions, or valuation outcomes. What we can do is prepare clients so that risks are reduced and surprises are anticipated.

That means:

• Pre-auction reviews of finance options, legal packs, and valuation considerations.
• Access to specialist lenders prepared to fund properties that high-street banks will not.
• Exit planning that looks ahead to refinancing or sale, with realistic timelines.
• Co-ordination between all professionals so that tasks run in parallel rather than in sequence.

Our value lies in helping clients face auctions with their eyes open, backed by structures that lenders recognise and respect.

Frequently Asked Questions

What must you do immediately after the hammer falls?
You must secure your finance facility (or confirm decision in principle), instruct valuers and solicitors, and arrange insurance from the moment of exchange. Willow Private Finance

Why are guide prices risky in the auction context?
Because guide prices are marketing tools and often differ from what lenders will value a property at — down-valuations are common, creating funding gaps. Willow Private Finance

How do legal pack surprises impact the 28-day timeline?
Defects in titles, restrictive covenants, short leases, or Section 20 notices typically emerge during legal review and can delay or derail financing. Willow Private Finance

What role does exit planning play in auction financing?
It is critical — bridging loans require a credible path to refinance into term lending or sale, supported by income evidence, rental coverage, or resale comparables. Willow Private Finance

What are the main tasks in the final days before completion?
You must satisfy lender conditions (insurance, works approvals, legal undertakings), coordinate all parties (solicitors, valuers, clients) and ensure nothing new disrupts the process. Willow Private Finance



What costs should be modelled from day one?
Bridge arrangement and interest fees, legal and valuation costs, SDLT (including additional property surcharges), contractor and professional fees, and exit costs (future valuations, product fees). Willow Private Finance

📞 Want help preparing for an auction purchase?

Book a free strategy call with a Willow specialist. We’ll review your legal pack, discuss finance options, and help map a realistic path to completion.