Auction purchase in Ancoats: £320,000 bridging loan completed in 19 days

Buying at auction is one of the few situations in property where the clock genuinely matters. Once the hammer falls, you have 28 days to complete. No extensions, no renegotiations. If you do not have the funds in place, you lose your deposit and potentially face legal action.

This case study is about a client who bought a Victorian period flat in Ancoats, Manchester at a property auction. He had been following the Ancoats market for about 18 months and spotted the flat on the lot list three weeks before the auction. The guide price was £270,000 and he expected it to go for somewhere between £290,000 and £320,000.

He called us the week before the auction to understand his options. He had around £100,000 in savings and wanted to know if we could arrange bridging finance quickly enough to allow him to bid with confidence.

The situation

The flat was a first-floor two-bedroom property in a converted Victorian cotton mill, which is exactly the sort of building Ancoats has become known for over the past decade. It was habitable but needed modernising, and it had a sitting tenant on a periodic tenancy paying below-market rent.

Our client's plan was straightforward. He would buy the property, serve notice on the tenant once the periodic tenancy allowed it, refurbish the flat to a high standard, and then either sell or refinance onto a buy-to-let mortgage. The exit strategy was clean and the numbers worked well.

The challenge was timing. He needed a decision in principle before bidding, because he needed to know his upper limit before sitting down at the auction.

What we did

We spoke on a Tuesday. By Thursday, we had a decision in principle from a specialist bridging lender that was comfortable with the sitting tenant and the property type. The DIP confirmed they would lend up to 80% loan-to-value on the purchase price, which gave our client a clear ceiling to work with at auction.

He registered, attended the auction on the following Tuesday, and bought the flat for £320,000. That gave him a loan requirement of £256,000.

From the auction date, we had to move quickly. The lender instructed their solicitors and valuer the same day. The valuation visit happened on day four. The valuer confirmed the property was worth £320,000 in its current condition, which satisfied the lender's requirements.

Legal work ran in parallel. Our client's solicitors were experienced with auction purchases and had dealt with bridging lenders before, which helped considerably. There were no title issues and the process was clean throughout.

We completed on day 19. Our client had nine days to spare.

A note on sitting tenants

Some bridging lenders will not touch a property with a sitting tenant, particularly one on a periodic tenancy. This is worth understanding before you bid on anything at auction. If a lot has a tenant in place, you need a lender who is comfortable with that situation, and you need to be honest with them about it upfront.

In this case, the lender we chose had experience with exactly this scenario and priced the risk accordingly. The rate was slightly higher than it would have been for a vacant property, but the deal still worked comfortably for our client.

What happened next

Within four months, the tenant had vacated and the flat was refurbished. Our client refinanced onto a buy-to-let product at a loan-to-value of around 65% and the bridging loan was repaid in full with no early repayment charge. The whole exercise worked out as planned.

If you are thinking about buying at auction and want to understand your options before you bid, give us a call. We can usually give you a clear picture within a day or two of your initial enquiry.