Property auctions are having a moment. And not just any moment—a proper boom.
In January 2024 alone, UK property auctions saw a 45% increase in available lots compared to the same month the previous year, generating over £135 million in sales. That's more than double the revenue from twelve months earlier. Investors, developers, and even first-time buyers are realising what savvy property people have known for years: auctions are where you find the real deals.
But here's the problem. When you win at auction, you've got 28 days to complete. Not 28 working days. Not "around a month." Exactly 28 calendar days, or you lose your 10% deposit and potentially face legal action from the seller.
Standard mortgages take a minimum of 8-12 weeks to complete. Some drag on for 16 weeks. You can see the maths doesn't work.
This is where auction finance comes in. It's bridging finance specifically structured to handle the unique pressures of auction purchases: tight deadlines, properties that often need work, and sellers who won't negotiate on completion dates.
If you're thinking about buying at auction—or if you've already got your eye on a property in an upcoming sale—this is everything you need to know about financing it properly.
Why Auction Properties Are Different (And Why Normal Finance Doesn't Work)
Let's start with why auction purchases require special finance in the first place.
When you buy a property the normal way, you've got time. You make an offer, it gets accepted, you arrange a mortgage, surveys happen, searches get done, solicitors exchange contracts, and eventually—weeks or months later—you complete. If your mortgage is delayed, you ask for an extension. Annoying, but not catastrophic.
At auction, this entire process is compressed into 28 days. And that timeline is non-negotiable.
Here's what actually happens when you win at auction:
Day 1: You win the bid
You sign a binding contract and pay a 10% deposit immediately. There's no cooling-off period. No "subject to mortgage approval." You've legally committed to buying the property.
Days 1-28: You've got to complete
You arrange finance, solicitors handle the legal work, and on day 28 (or before), you pay the remaining 90% and take ownership.
Day 29: If you haven't completed
The seller keeps your 10% deposit. They can also sue you for any losses they've incurred—like if they have to resell the property at a lower price.
Can you see why a standard mortgage doesn't work here? Even the fastest mortgage lenders need 8-10 weeks minimum. They want full surveys, detailed income assessments, multiple rounds of underwriting, and mountains of paperwork.
Auction finance, on the other hand, is designed for this exact scenario. It's short-term bridging that can complete in under 28 days, secured against the property itself, with minimal fuss.
What Actually Is Auction Finance?
Auction finance is just a specific type of bridging loan. The fundamentals are the same—short-term, interest-only, secured against property—but the structure and timeline are optimised for auction purchases.
Loan amounts
Usually £75,000 to £1,000,000+ (sometimes higher for development projects)
LTV (Loan-to-Value)
Up to 75%, meaning you need a 25% deposit including the 10% you paid on auction day
Term
Usually 6-18 months, giving you time to refurbish and either sell or refinance
Interest rates
0.75% - 1.5% per month depending on the deal
Speed
Can complete in 14-28 days when properly prepared
The key difference between auction finance and other bridging loans? Timing. Everything about auction finance is geared toward meeting that 28-day deadline.
The Golden Rule: Get Finance Pre-Approved BEFORE You Bid
This is the single most important piece of advice in this entire article: Never bid at auction without pre-approved finance.
We've seen it too many times. Someone spots a property at auction, gets excited, bids on the day, wins, pays their 10% deposit, and then—only then—starts thinking about where the other 90% is coming from.
What happens next is predictable and painful. They scramble to arrange finance. Maybe they get it sorted in time. More often, they don't. They lose their deposit. They get sued. And they learn an expensive lesson about preparation.
Don't be that person.
Here's what you should do instead:
Identify Your Target Property
Most auction houses publish their catalogues 2-4 weeks before auction day. View the property (if possible), review the legal pack, and decide if you want to bid.
Contact a Bridging Lender
Before auction day, call a lender (like us) with the property details. We'll give you a decision in principle: "Yes, we'll lend £X against this property at Y% interest, subject to valuation."
Get Your Deposit Funds Ready
Make sure you've actually got the 10% deposit available immediately. Most auctions want payment on the day or within 24 hours.
Brief Your Solicitors
Let your solicitor know you're bidding at auction and might need them to work fast. Ideally, use a solicitor who specialises in auction purchases and bridging finance.
Bid with Confidence
You've got finance pre-approved and your solicitor ready to go. If you win, you know you can complete within 28 days.
This approach turns a gamble into a calculated strategy. You're not hoping you can arrange finance—you know you can.
What Types of Properties Are Sold at Auction?
One reason auction finance is so popular is because auctions attract properties that traditional buyers avoid. And those properties—the ones that need work, have quirky issues, or require fast completion—are often where the best value lies.
Common auction property types:
Refurbishment Projects
Properties needing light to heavy renovation. Maybe they're dated, neglected, or genuinely derelict. Banks won't touch them, which means less competition and lower prices.
Repossessions
Properties being sold by lenders who've repossessed them from defaulting owners. Usually sold with vacant possession and priced to shift quickly.
Probate Sales
Properties being sold as part of estate settlements. Often unmortgageable due to condition or legal complexity, but full of potential.
Properties with Sitting Tenants
Investment properties sold with tenants already in place. Banks are cautious about these, but for investors, they can be cash flow from day one.
Development Opportunities
Plots with planning permission, conversions, or properties ripe for extension or subdivision. These need development finance, not mortgages.
Properties with Legal Complications
Short leases, unclear boundaries, restrictive covenants, access issues—anything that makes traditional lenders nervous.
Commercial Property
Shops, offices, industrial units, pubs. Many of these are unmortgageable through traditional routes but perfect for investors with bridging finance.
The common thread? These properties don't fit the neat boxes that mortgage lenders require. But with the right finance and the right strategy, they're opportunities, not problems.
How Much Deposit Do You Need for Auction Finance?
Most auction finance lenders will lend up to 75% of the property's value (LTV). That means you need to provide 25% as your deposit.
Here's how the maths works:
Example:
- • You win a property at auction for £200,000
- • On auction day, you pay a 10% deposit: £20,000
- • You need auction finance for the remaining 90%: £180,000
But lenders base their loan on the property's value, not just your purchase price. If the property is genuinely worth £240,000 (maybe you got a great deal), the lender might advance:
• 75% of £240,000 = £180,000
In this scenario, your 10% auction deposit is enough to cover the difference, and you've got your 25% equity.
But what if the property needs work and isn't worth £240,000 in its current state? Then the lender values it at its current condition—say £200,000—and you'd need:
- • 75% of £200,000 = £150,000 from the lender
- • You'd need to pay: £200,000 - £150,000 = £50,000 (25%)
- • You've already paid £20,000 on auction day
- • So you need an additional £30,000 before completion
This is why understanding valuations before you bid is crucial. You need to know whether your 10% deposit will be enough, or whether you'll need additional funds.
What's Your Exit Strategy Going to Be?
Just like any bridging loan, auction finance requires a credible exit strategy. Lenders need to know how you're planning to repay within 6-18 months.
Common exit strategies for auction properties:
Refurbish and Refinance
You buy a property needing work, spend £30k on refurbishment, and then refinance onto a standard buy-to-let or residential mortgage once it's mortgageable. This is probably the most popular exit for auction properties.
Refurbish and Sell (Flip)
You buy, renovate, and sell at a profit. The sale proceeds repay the bridging loan. Make sure you've got realistic timelines and market evidence that the property will sell.
Immediate Refinance (Under-Market Purchase)
You buy a property well under market value in good condition, then immediately refinance onto a long-term mortgage. The property was at auction because of timing pressure or probate, not condition.
Refurbish and Rent, Then Refinance
Similar to refurbish-and-refinance, but you get a tenant in place first to strengthen your refinance application. Takes longer but often achieves better mortgage terms.
Development and Sale
You've bought a development opportunity—maybe a plot with planning or a conversion project. You build or convert, then sell. Development exit finance might transition into this if needed.
Whichever exit you choose, you need evidence. A mortgage in principle if you're refinancing. Estate agent valuations and comparable sales if you're selling. Build costs and timelines if you're developing.
Vague exits don't get approved. Specific, evidenced exits do.
The Auction Finance Timeline: What Happens After You Win
Let's walk through exactly what happens from the moment you win at auction to the moment you complete.
Auction Day (Day 0)
- • You win the bid and immediately sign the contract
- • You pay your 10% deposit (usually by debit card or banker's draft)
- • You collect the legal pack and get a copy of the signed contract
- • You formally own the property in 28 days' time
Day 1-3: Notify Your Lender and Solicitor
- • Contact your bridging lender (who you've already spoken to pre-auction) and confirm you won
- • They'll issue formal terms and begin the valuation process
- • Your solicitor receives the legal pack and begins their work
Day 3-7: Valuation
- • The lender arranges a surveyor to value the property
- • For standard properties, this happens quickly
- • The surveyor's report comes back confirming (or adjusting) the property value
Day 7-14: Underwriting and Formal Offer
- • The lender's underwriters review everything and issue a formal loan offer
- • You review and sign the offer documents
- • Your solicitor begins the legal completion process
Day 14-21: Legal Work
- • Your solicitor and the lender's solicitor handle contracts, security documentation, and Land Registry work
- • This is where having a fast, experienced solicitor makes a massive difference
Day 21-28: Completion
- • All legal work is finalised
- • The lender releases funds to your solicitor
- • Your solicitor pays the remaining balance to the seller's solicitor
- • You receive the keys
- • The property is yours
If everything runs smoothly, you're completing with a few days to spare. If there are delays—slow valuations, legal issues, document problems—those spare days disappear quickly.
This is why preparation matters so much. Every hour saved on the front end gives you more buffer on the back end.
What Can Go Wrong (And How to Avoid It)
Even with the best planning, auction purchases can hit snags. Here are the common problems and how to sidestep them:
Problem: Down-Valuation
You bought for £200k, but the surveyor values it at £180k. Now your LTV is worse and you need more deposit.
Solution: Get a realistic valuation indication before you bid. Don't overpay at auction just because the adrenaline's pumping.
Problem: Legal Issues Discovered Late
The legal pack looked fine, but your solicitor spots a problem: a restrictive covenant, unclear boundaries, or planning violations.
Solution: Have your solicitor review the legal pack before auction day, not after. Pay for their time upfront—it's worth it.
Problem: Lender Changes Terms
The lender's pre-auction indication was based on incomplete information. Once they do a full assessment, the terms change.
Solution: Be completely transparent about the property upfront. Don't hide issues hoping they won't be spotted. They will be, and it'll cost you time.
Problem: Slow Solicitors
Your solicitor treats the auction purchase like a standard conveyancing job. By day 21, they're still "getting around to it."
Solution: Use a solicitor who specialises in auction purchases and bridging. Don't use your cousin who "does a bit of property law on the side."
Problem: Funds Don't Arrive on Time
It's day 28, you're meant to complete, but the lender's funds haven't hit your solicitor's account due to a banking delay.
Solution: Aim to complete on day 26 or 27, not day 28. That buffer saves you from last-minute technical delays.
How Much Does Auction Finance Cost?
Let's talk money. Auction finance costs more than a standard mortgage, but that's because you're getting speed, flexibility, and the ability to buy properties banks won't touch.
Interest Rates
Typical auction finance rates: 0.75% - 1.5% per month (roughly 9-18% annually)
Your rate depends on:
- • LTV (lower is better)
- • Property type and condition
- • Your experience as an investor
- • Strength of your exit strategy
Example:
Borrow £150,000 at 1.2% per month for 9 months:
- • Monthly interest: £1,800
- • Total interest over 9 months: £16,200
Is that expensive? Compared to a 4% mortgage, yes. But you're not comparing apples to apples. A mortgage won't complete in 28 days. A mortgage won't lend on a derelict property. Auction finance does both.
Fees
- • Arrangement fee: Usually 1-2% of loan amount
- • Valuation fee: £300-£800 depending on property
- • Legal fees: Your solicitor and the lender's solicitor
- • Exit fees: Some lenders charge these on redemption (we'll be clear upfront if it applies)
Total Cost Example:
- • Loan amount: £150,000
- • Arrangement fee (2%): £3,000
- • Valuation: £500
- • Legal fees: £2,000
- • Interest (9 months at 1.2%): £16,200
- • Total cost: £21,700
If that £150k bridging loan let you buy a £200k property for £180k—giving you £20k instant equity—the numbers still work. You're up £20k in equity, minus £21.7k in costs, so you're slightly down initially. But after refurbishment and refinancing, you've got a property worth £240k with only £150k of long-term debt. That's how wealth is built.
Can You Get Auction Finance with Bad Credit?
Short answer: possibly, yes.
Auction finance lenders care much more about the property and your exit strategy than they do about your credit score. If you've got CCJs, missed payments, or even past defaults, it doesn't automatically disqualify you.
What lenders will focus on instead:
- • Is the property good security?
- • Is your exit strategy realistic?
- • Do you have enough deposit/equity in the deal?
- • Have you got experience in property (or solid professional support)?
Bad credit might mean slightly higher rates or lower LTV, but it rarely means outright rejection if the fundamentals are sound.
The key is being upfront about your credit situation from the start. Don't try to hide it. Lenders will find out anyway when they run credit checks, and surprises create delays.
Is Auction Finance Right for Your Deal?
Auction finance makes sense when:
- You've found a property at auction that represents genuine value
- The property needs work or has issues that make traditional mortgages difficult
- You've got a clear exit strategy (refurbish-refinance, fix-and-flip, etc.)
- You can afford the 25-40% deposit
- You're comfortable with the higher short-term costs in exchange for the opportunity
- You understand the 28-day deadline and can meet it
Auction finance doesn't make sense when:
- You're stretching financially just to scrape together the deposit
- Your exit strategy is vague or overly optimistic
- You haven't budgeted for refurbishment costs
- You're bidding emotionally rather than based on solid numbers
Done right, buying at auction with bridging finance is one of the most reliable ways to acquire under-market-value property in the UK. You're competing with a smaller pool of buyers (most can't arrange finance), you're moving fast, and you're targeting properties with built-in upside.
Done wrong—bidding without pre-approved finance, underestimating costs, or lacking a clear exit—it's an expensive disaster.
At Black Props, we've financed hundreds of auction purchases. We know what works and what doesn't. If you're thinking about bidding at auction, talk to us first. Let's make sure you're going in with your eyes open and your finance sorted.
Because the last thing you want is to win at auction and then realise you can't complete.