Top Mistakes to Avoid When Using Auction Finance

Buying at auction can be one of the fastest ways to secure a property below market value — but it also carries risks.

When you’re using auction finance, even small mistakes can lead to missed deadlines, higher fees, or lost deposits.

Here are the most common auction finance mistakes we see, and how you can avoid them to ensure a smooth completion.

Bidding Without Pre-Approval

The number one mistake buyers make is bidding before they’ve spoken to a broker or lender.
Without a Decision in Principle (DIP), you won’t know how much you can actually borrow — and that’s dangerous when a 10% deposit is at stake.

Fix: Always secure a DIP from a specialist auction finance broker before the auction day.

Not Checking the Legal Pack

Every auction property comes with a legal pack, and ignoring it can cost you thousands.

It may contain restrictive covenants, planning issues, or details that make the property unmortgageable.

Fix: Get your solicitor or broker to review the legal pack before bidding, especially if you’re relying on short-term finance.

Assuming All Properties Qualify for Standard Mortgages

Many auction properties are unmortgageable in their current state — no kitchen, no bathroom, or structural issues.

Trying to get a high-street mortgage will waste time.

Fix: Use specialist auction finance lenders who understand refurbishment, derelict, and development properties.

Underestimating the Time Needed to Complete

You typically have 28 days (sometimes less) to complete after the hammer falls.

Buyers often underestimate how long valuations, legals, and underwriting can take.

Fix: Work with an auction-experienced broker and solicitor who can coordinate with the lender’s legal team immediately after the win.

Forgetting About the Exit Strategy

Auction finance is short-term. If you don’t plan your exit — sale or refinance — you could be stuck paying high interest beyond your term.

Fix: Have your exit strategy agreed and documented before applying for the loan.

Lenders will assess your exit before they even approve the case.

Ignoring Fees and Interest Calculations

Some borrowers focus on the interest rate alone, missing fees like arrangement costs, exit fees, or valuation charges.

These can quickly add up, making your deal less profitable.

Fix: Ask your broker for a complete cost breakdown, including all fees and the total interest over the term.

Choosing the Wrong Lender

Not all lenders move at the same speed. Some have slower legal teams or stricter valuation criteria.

A mismatch between your property type and lender criteria can delay everything.

Fix: Use a broker who knows which lenders can move fast for your specific property and location.

Poor Communication Between Parties

Auction completions are a race against time. Miscommunication between solicitors, brokers, and lenders can kill a deal.

Fix: Choose a broker who manages the process from start to finish, keeping everyone updated daily.

Summary:

Avoiding these mistakes can mean the difference between completing on time or losing your deposit. Preparation, experience, and speed are everything in the world of auction finance.

Case Studies

Case Study 1 – Missed Deadline Turned Around

Client purchased a London flat at auction with only 14 days left to complete.

Their original lender fell through due to missing documents.

Auction Finance UK stepped in and arranged a new facility within 6 working days, saving a £30,000 deposit.

Case Study 2 – “Unmortgageable” Cottage Success

A first-time investor bought a cottage with no bathroom or heating.

High-street lenders refused to fund it.

We secured a bridging loan against the open market value, allowing the client to refurbish and refinance within 5 months.

Case Study 3 – Exit Planning Prevented Default

Developer had an auction bridging loan expiring in 9 months but hadn’t arranged an exit.

Auction Finance UK refinanced him onto a development exit product ahead of term, avoiding penalty interest and improving profit margins.

FAQs

Q 1. What’s the most common auction finance mistake?

Ans: Not having a Decision in Principle before bidding — it’s the main reason deals collapse.

Q 2. Can I get auction finance with bad credit?

Ans: Yes. Specialist lenders assess the property and exit plan more than credit history.

Q 3. What happens if I miss the 28-day completion deadline?

Ans: You risk losing your deposit and being liable for additional auction penalties.

Q 4. Can I use auction finance for refurbishment projects?

Ans: Absolutely. Many products are designed for light or heavy refurbishment works.

Q 5. How do I know if a property is unmortgageable?

Ans: If it lacks essential facilities or has severe structural issues, it’s likely unmortgageable — check the legal pack and valuation early.

Ready to secure your auction finance fast?

Speak to our team today and get a same-day Decision in Principle.