Karen Bennett, Director of Sales and Marketing, Commercial Mortgages, Shawbrook Bank asks:

How can a lender’s products and processes ensure that auction deals run smoothly?

According to recent data from the Essential Information Group, there has been a significant rise in the number of properties offered and sold at auction during 2013. In April alone there was a 13 per cent increase in lots sold and a 21 per cent increase in funds raised. This growth suggests the gradual return of confidence to the market, and brokers and clients in the know are taking full advantage.

Expensive bridging loans have traditionally been the funding of choice for speedy acquisition. Lenders like Shawbrook are helping to drive down prices with short term finance, and as a result we’re seeing more and more brokers turning to STL products to assist clients with their auction purchases.

Of course, brokers want to work with a lender they can trust to deliver in very time sensitive situations, and we know it’s a real leap of faith for a broker looking to switch their short term loan provider. Time sensitive auction opportunities need correspondingly speedy lenders to facilitate them.

So how are specialist lenders like Shawbrook delivering on its word?

Firstly, our flexible product range means we tailor our offer for every client. This could range from offering short term finance for the quick acquisition of either a residential, mixed use or commercial property, to offering a short term refurbishment loan for the purchase or refinancing of a property with the intention of undertaking decorative work to increase value or rental yields. It depends entirely on the client and their unique circumstances.

Our short term loan offering includes thorough legal due diligence and deals are underwritten on a case-by-case basis. In order to take this personal approach, we rely on our brokers to come to us with a clear understanding of their client’s needs – the property they are hoping to purchase, its use after purchase, the exit plan, and the level of their client’s experience.

This is of the utmost importance when dealing with mortgages for auction acquisitions, as it reduces the time consuming back-and-forth between those involved that is the enemy of tight completion timelines. Ultimately, undertaking thorough preparation when a client first approaches you will help reduce bottlenecks later on when time is of the essence.

Brokers are at the heart of Shawbrook’s business, and we do everything we can to make your deals happen. When working with our trusted brokers, we will often agree to a mortgage in principle, so clients can go to auction in the knowledge that funding is already in place. If the client’s bid is successful, Shawbrook’s solicitors can be instructed at the same time as the valuation, which helps the smooth-running of deals with a tight deadline.

It is not always possible to predict how things will unfold when working on time sensitive cases, but the flexibility of our products and breadth of options accommodate each client’s needs and changing circumstances. For example, we removed our minimum term requirement across all short term products, so that if a client executes their plans for the property more quickly than they’d calculated they can exit at any stage without minimum interest charges.

At the other end of the spectrum, if after 18 months a client changes their original plans for the property – holding onto it for rental after refurbishment rather than selling it on straightaway, for example – they also have the option of moving onto a longer term facility with Shawbrook. In so doing they have the repayment choice of 3, 5 and 10-year interest only, 3-30 year part capital (at 5 per cent, 7.5 per cent or 70 per cent) or 3-30 year full capital repayment.

As the property market continues to show signs of growth, auction purchases are gaining popularity. These deals are exciting to be a part of, but to ensure their smooth-running brokers need to be prepared, plan ahead and choose a lender that understands the intricacies and changeability of these cases, and which has the breadth of options to cater for them.