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Financing An auction – Right From The Perspective Of Property Developers

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Auction finance is one of the greatest and best ways for property developers to obtain property at below-market-value, usually from an encouraging seller. This could also be a suitable option for the first-time property developers too, if they have the right predictions and anticipations from the very beginning. In other words, auctions can definitely be a smart way for all the established developers to purchase properties at an amount below the market price, this is mostly crucial for the success of a development where purchasing at the right price can create the ultimate difference.

But real estate auctions can be a riskier way of purchasing property than the conventional channels and the properties are usually sold on tough schedules, which don’t leave you with enough time to carry out due diligence and necessary research. There are different tips for property developers to know more on auction finance.

Auction finance – How can this assist property developers?

Raising your hand and bidding on a real estate property that’s worth thousands of dollars is indeed an intimidating aspect, regardless of you being experienced or inexperienced. In case you make the winning bid, you can pay a non-refundable deposit on the same day and you will have 30 days to pay off the balance.

This clearly implies that the time window for auctions is way shorter than the conventional ways of buying property and it is even tougher to get financing on time. Auction finance is henceforth a flexible and versatile product which can be tailored in order to meet your personal needs. Here the general idea is that you will walk into the auction room with an already-set-agreement and therefore you should have clear criteria of budget in your mind.

Auction finance – How does it work?

As there are lots of real estate properties which clear 6-figures in value these days, a 10% deposit can even become a big chunk of cash. In such situations, property auction finance can assist you in several ways and it starts way before you step to the process of auction. You can arrange funding way ahead of time through auction finance and as soon as the hammer falls, you clearly know what your budget is. Here’s how it works:

  • Planning & research: The foremost step to obtaining auction finance is planning on the kind of property you wish to add to your portfolio and then choose an auction to attend.
  • Provisional acceptance: Go through the provisional acceptance process of the lender. It may include property valuations, credit checks, a look at your income and many such things.
  • Selecting targets: With conditional acceptance from the lender, you may get a certain criteria to abide by for the property you’re trying to win. Start narrowing your targets at the auction.
  • Closing the deal: Once you’ve made a winning bid on a property, you have to put down the deposit. With auction finance, the payment is paid by the lender.

Overall, you get a chance to add to your investment portfolio even though most of your capital is tied in other properties. Such is the benefit of auction finance.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

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