Purchase of Property from Administrators

Buying a property from an insolvent seller whose business has failed, or from the lender who has seized a property for non-payment of a mortgage or other loan secured on it, can mean securing a property at low cost. The administrator will be looking for a quick sale rather than the highest price and, if you can move quickly, you may be able to secure a bargain.

However, there may be some challenges if you are thinking of buying a property from an insolvent seller. The lower price reflects a considerably greater risk and there are a number of issues to be aware of.

Due Diligence. As a buyer, you and your solicitor would normally go through a round of checks and searches before buying to ensure that there are no problems with the property that could reduce its value or make it difficult - or even impossible - to sell on. However, when you are looking at an insolvency sale, the receiver or administrator will have little or no actual knowledge of the property they are selling. This means that important information such as details of boundaries, access, availability of utilities, disputes, breaches of planning and building regulations is unlikely to be forthcoming. 

Insolvency practitioners will not accept any liability, which means that there will be no legal redress if a problem comes to light after the transaction has gone through. You will need to get thorough legal advice and a professional survey of any property you want to buy in this way

Gazumping. Gazumping - where a seller pulls out of an agreement to sell in favour of a better offer from another buyer - is quite common with this type of sale. Marketing Receivers and administrators are under obligations to get the best deal they can for creditors. Therefore they will often refuse to take the property off the market even when an offer has been accepted. As a buyer you will therefore be at risk of being gazumped, resulting in potentially sizeable wasted costs.

Timing. Insolvency practitioners need to bring in funds quickly and will often set a very short timescale for a buyer to complete the purchase. This means that you and your advisers are likely to be under significant pressure to get the deal done.

Together these factors may mean that the usual approach to raising funds to buy commercial property - a Commercial Mortgage - may not be suitable. While it can be the most cost-effective approach, the time required and the need for full documentation, searches and full due diligence may mean that a Commercial Mortgage will simply take too long to arrange.

At Rangewell we can provide the solution.

Buying property quickly with a Bridging Loan

A business Bridging Loan is a short-term loan secured against property, which can be used to buy the property itself. The property can be residential, such as buy-to-let flats, or commercial, such as offices, factories or warehouses. It’s called a Bridging Loan because it is designed to bridge a short-term funding gap. Bridging Loans are usually repaid quickly, either by the sale of the property or by another finance product designed for the long-term, such as a mortgage.

Bridging Loans are intended to let you deal with urgent needs or to take advantage of opportunities - such as the chance to buy a property from an administrator. Lenders offering Bridging Finance will carry out detailed checks and apply conservative lending criteria but are able to make rapid decisions because they can work without the bureaucracy that slows down many traditional lenders. Bridging Loans can, therefore, be arranged within a matter of hours, and funds released in as little as 72 hours.

What do Bridging Loans cost?

Short-term finance is always more expensive than long-term lending. The costs of Bridging Finance can be relatively high but, because loans are for the short-term, the overall cost may have little actual impact on the long-term costs of a major purchase.

Interest rates charged will vary depending on your circumstances and your business, and the deal to be funded. Current rates can range from 0.7-1.5% per month, with even higher rates for more difficult propositions.

There will also be fees, including an arrangement fee which can be 2% of the loan amount, an exit fee which can equal one month’s interest and surveyors’ and legal fees. If the loan runs over the agreed term there will also be substantial penalty fees.

Repayment arrangements can vary. In some cases, all fees and interest can be rolled up into the loan, which can be settled with a single repayment.

Why you need Rangewell to find the Bridging arrangements that are right for you

If you are using a Bridging Loan as a short-term tactic for the purchase of a property from an administrator, you may be able to secure it for a low purchase price. You may then want to pay it off with a solution designed for the long-term, such as a Commercial Mortgage.

At Rangewell, we can help secure both the Bridging Loan you need now and the mortgage that you need afterwards. 

We can also help you save money by getting an improved deal on both types of funding. This is vital when dealing with large sums, as getting the right deal can make a difference of tens of thousands of pounds.

Our knowledge of bridging lenders is crucial. Rates vary greatly between lenders, and even a fraction of a percentage point can make a substantial difference to what you actually pay, while fees and penalties can complicate the position still further. Plus, there are many different lenders who may be prepared to offer you funding. Each has its own approach to interest rates and fee arrangements, and comparing offers needs an expert eye.

At Rangewell, we know the lenders who can offer business bridging, and we can use our expertise to identify the deal that really is the most appropriate for you. Our knowledge can not only help you secure the funding you need - it can save you a great deal of cash.

Once your bridging loan is in place, you can progress with the purchase, avoiding the risk of gazumping. At the same time, we can work on getting the longer-term funding solution that is most appropriate for your needs.

Why Rangewell?

Our understanding of the lending market is unrivalled. This means that we can secure the most competitive deal for all types of property finance. If your property deal requires complex funding, with a package made up of more than one lending product, this understanding is vital. Not only can it make complex deals possible and help you secure bargains, but it can also save you money. 

We know the lenders to approach. There are many lenders who will be prepared to advance commercial property funding. The risk to the lender is low, because the value of property is generally stable. But some lenders will specialise in certain types of property. Knowing which lenders are most receptive to applications form particular areas can be key to securing offers of funding swiftly. 

Borrowing is complicated by the fact that there are many different lenders who may be prepared to offer funding. Each has their own approach to interest rates and fee arrangements, and comparing them all may require expert knowledge to fully understand what is really being offered.

Our expertise with negotiation. Unlike residential property purchases, commercial property funding rates are based on an individual assessment of the value of the property and the potential of the business and rates will vary substantially between different lenders. We frequently negotiate with lenders to secure the lowest rates and the most favourable terms. With both bridging and mortgage funding, even a fraction of a percentage point can make a substantial difference to what you will actually repay each month, and understanding fees and penalty charges is also vital to extra cost. 

At Rangewell, we work with lenders across the market - and we can call on the expert knowledge you need. It lets us ensure that you have the financial solutions you need when you are considering a business property purchase from an adminstrator. Our knowledge can not only help you secure the funding you need - it can save you a great deal of cash.

ANY PROPERTY USED AS SECURITY, WHICH MAY INCLUDE YOUR HOME, MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.