Can you buy a house for a pound?
A July 2017 property auction in Birmingham featured houses with a guide price of just £1.
Three terraced houses in Middlesbrough were up for bids for a £1 guide price. The final winning bids were much more than £1 though, at £31,000 for one house and £36,000 each for the other two.
A Birmingham house sold for £40,000, which was twice its guide price of £20,000.
The auction, held at Aston Villa FC, raised £12m in total. Many lots were sold for considerably more than the Middlesbrough terraced houses and made much more than their guide prices, such as the former Sheldon Police Station, which had a guide price of £180,000 and was sold for £465,000.
Houses bought for less than £40,000 will usually be in a derelict or semi-derelict condition and will require extensive refurbishment work. Many lenders will not provide a mortgage for such houses. A bridging loan can be used to both purchase the property and fund the necessary building work. Once the house is fit to live in, the owner can apply for a standard long-term mortgage and repay the loan.
The full purchase price for property bought at auction is usually required in less than a month. Even if the property qualifies for a mortgage, there may not be enough time to arrange one before this purchase deadline. A bridging loan can be arranged much quicker and used to pay for the property, then repaid once the mortgage funds become available.