A growing number of investors are buying commercial property at auction.
According to Allsop’s Q3 Market Update, the value of commercial property auction sales has increased by 36% on the same period last year and one of its auctions in September raised the largest amount since the market slowed in the run-up to Brexit and the General Election of 2019. Allsop says that several trends have emerged in the commercial auction market over the last year, including a growing appetite for larger purchases, the return of overseas investors and the continued dominance of retail assets. So, if you are looking at buying a commercial property at auction, what do you need to know?
A commercial property auction works in the same way as auctions for residential property in that, once a sale has been agreed at the auction, there is usually then just 28 days for completion of the transaction. Often, a reservation fee of 10% will be payable at the point of winning the auction on a property and failure to complete in the allotted time could see a buyer losing that fee. This puts a big emphasis on thorough preparation and partnering with the right lender you can trust to deliver the funds when you need them.
As with any auction, it is important to make sure you have all of the detailed information you need and you may also want to instruct a surveyor to carry out an independent valuation of the property ahead of making a bid. This will obviously involve some expenditure in advance, but auctions can still provide an opportunity for investors to acquire assets at an attractive price, and proper preparation can help to avoid costly mistakes.
Fast and flexible access to finance is important, which is why bridging lending is often used to fund auction purchases – and commercial auctions are no different. You may also want to consider a more innovative type of product, that can provide immediate access to funding to help cover some of the associated costs of an auction purchase, as well as the price of the property.
For example, at Alternative Bridging, we offer the Alternative Overdraft, which is a flexible loan facility available from £250,000 that can be drawn upon whenever required.
It means that you can have the confidence of almost immediate access to funding, without the delays and charges of setting up a loan every time it is required. The loan term is up to 24 months, the maximum LTV is 70%, and when the loan is dormant there are no charges payable.
If you want to join the growing number of investors who are buying commercial property at auction, make sure you do it right. Do thorough preparation ahead of the auction, partner with the right lender and consider more alternative products to fund the purchase and you can make sure you buy with confidence.