Using Bridging Finance for Auction Purchase in Ireland

Auctions are attractive to buyers because of their speed. Purchases of auction properties usually need to be completed within a short space of time and long term financing such as mortgages can be difficult to put into place quick enough to meet deadlines.

The auction process is very different to buying from an estate agent. When you buy at an auction, you are typically required to sign contracts and pay a deposit there and then. Things move quickly from the hammer falling and the sale being finalised. Auction properties are sold as they are so once you are the successful bidder, you are legally required to complete the sale.

At Onate, we work quickly in order to make transactions happen, a vital component for anyone purchasing an auction property.

Here is Onate’s guide to auction property purchase:

Before the auction

Before you attend an auction, there are steps you’ll need to take in preparation:

1. Call the auctioneer and arrange a viewing of the property.

2. Know your maximum budget and what costs you’ll need to set that budget aside for. For example: solicitor fees, surveyor fees, stamp duty and insurance. Also once you have viewed the property you will have an understanding of the general condition and whether you need to allow a budget for refurbishment and general upgrading.

3. Tee up your solicitor to seek out and review the contracts and title documents at the first opportunity. These should be reviewed and any queries raised prior to the auction.

4. The property and property map should be surveyed by an engineer. If it seems too good to be true, it more than likely is. Any defects must be uncovered before the auction takes place because once the deal is done, you’ll have no recourse against the seller. The engineer must also check that the title map for the property corresponds to the property itself, and carry out a planning search with the Local Authority Office to ensure the property is compliant with planning and building regulations.

5. It’s advisable to investigate whether there are any planned developments in the area. You can do this at the Local Authority Office.

6.  Your finances must be in order. Make sure you have mortgage approval before you buy at auction. When you successfully bid on a property, you will need to:

• sign the property purchase contract

• pay the deposit

• pay the balance on the closing date as set out in the contract.

7.  On the day of the auction, make sure you have your details correct and that you feel comfortable with the process. Look out for amendments to the contract as this is a regular occurance. Speak to your solicitor about any changes.

At the Auction

If you are the highest bidder, you will sign binding contracts for the property and pay a deposit of 10% of the purchase price. The purchase usually completes 4 to 5 weeks from the auction day.

If you are the highest bidder but the reserve price (the lowest price the seller is willing to sell the property for) is not reached at auction, the property will not be sold to you. Your details will be taken and the seller will make a decision about their next steps with the property.

Stamp Duty

 Stamp Duty is a tax charged on the documents that transfer the ownership of property from one person to another and is paid by the purchaser of the property.

The Stamp Duty level that you pay depends on:

·  whether the property is residential or non-residential

·  the property value.

As mentioned, it is best to determine your bid level, costs and finance amount required before the auction. It is at this stage that talking to us at Onate can be beneficial.

We are in a position to determine what level of finance we will be able to offer you on a particular property. This could be up to 65% of the purchase price depending on where the property is located. In the event that the property is vacant, we may be in a position to provide you with some interest roll up while you refurbish the property for tenants. 

As you sign contracts at the auction, you will need a lender that can move quickly to close out the transaction and we have proven experience in the marketplace of doing just this.  

Our offering is flexible and is a practical tool to assist you on your auction journey.