Your quick guide to property auctions in South Africa
19 February 2018 FINANCE
By Zuko Komisa
The popularity of auctions in South Africa has grown tremendously over the years, with the many people in search of bargains and deals in these tough economic times. Whether it’s a foreclosed house, a repossessed car or tons of appliances on offer, it’s important to have a basic understanding of how auctions work.
What are auctions?
Auctions are a public sale in which goods or properties are sold to the highest bidder. To be on the safe side of any sale, always make sure you know what you are buying. When you take part in an auction you need to familiarise yourself with the terms and conditions including the deposit amount and the methods of payment as hidden fees have a way of creeping up on you. Buyer’s guide and/or the catalogue on various auction websites usually have all the relevant information.
It also helps to attend a few auctions before committing to make a purchase, this will allow you see trends and insight of how the game is played.
Bidding is an offer of payment made or tendered at an auction by a prospective buyer when making one you need to make sure you register early and read the conditions of sale and also be aware of VAT and commission protocols.
A few tips for purchasing property at an auction
Due diligence before a sale
- Inspect any property in which you are interested well before the auction date. Remember that properties are sold “voetstoots” (which means “as is”).
- Get a copy of the Conditions of Sale, know exactly what is being offered before you commit.
- Prepare your finances prior to bidding, this will save you a lot of unnecessary headaches.
- Gather as much additional information as you can about the property and the area ahead of the auction.
At the auction
- Register as a bidder, you will need all the relevant documents during the registration.
- Pay attention if there’s any amendments or additions to the Conditions of Sale
- Request a copy of the Order of Sale sheet, make sure you are well seated and ready for the property that interests you.
Here are some important Auction Terms you must familiarise yourself with
Commission – The amount the auctioneer charges in return for organising a successful sale. It is usually paid by the buyer.
Fall of the Hammer – Signals the end of a period of bidding for a particular item or property at an auction.
Gearing – The process of funding the acquisition of assets through borrowing, such as buying a property by getting a home loan from a bank.
Lot Number – The number assigned to a certain item or property at an auction.
Non-Suspensive Sale – A property sale which is not contingent upon the buyer being able to obtain mortgage finance.
Conditions of Sale – The terms under which a property is being sold at auction.
Order of Sale – The order in which lots at an auction will come up for sale. Properties in Possession (PiPs) – Properties that have been taken back by a bank following a legal process resulting from owners defaulting on their home loans.
Proxy – A stand-in or a person authorised to perform certain actions on behalf of another, like bidding on their behalf at an auction.
Reserve Price – A minimum price for any item or property on auction that has been agreed on by the seller and the auctioneer.
Sale in execution – A sale of goods or properties that have been attached by a sheriff following a judgment for debt obtained by a creditor.
Surety – A pledge given to protect the recipient against loss in case the terms of a contract are not filled.
Title Deed – The legal document that proves ownership of a particular property.
Voetstoots – A terms that describes the sale of a property exactly “as is” or with all its faults, and where the seller has no legal responsibility for its condition.
Having as much information about your purchase as possible will enable you to get a great deal at the fraction of its original price.