Property auctions are a growing trend in South Africa. This guide explains the auction process, from finding an auction to understanding bidding procedures.
Finding Auctions
Property auctions are advertised through various channels, including newspapers, real estate agent websites, and auction house websites. Different auction types exist:
- Voluntary Auctions: The seller chooses to auction the property, often aiming to achieve the highest possible price through competitive bidding.
- Bank Auctions: Organized by banks due to seller mortgage arrears. These auctions may offer opportunities for buyers as properties are often sold at reduced prices.
- Sheriff's Auctions: Conducted when a bank repossesses a property due to loan default. These auctions often present the most significant discounts for buyers.
Attending an Auction
Attending an auction typically requires obtaining a bidder's card, usually a straightforward process requiring FICA documents. Attending auctions as an observer beforehand is recommended to understand the process.
Property Inspection
Property inspection opportunities vary. Drive-by viewings might be possible, but interior inspections are not always guaranteed. Buyers should confirm inspection availability before the auction.
Key Considerations for Bidders
- Financing: Securing financing is crucial before bidding. Winning bidders are legally obligated to complete the purchase. Deposits and auctioneer commissions are typically due immediately after a successful bid.
- Prequalification: Prequalification with a bond originator can help determine affordability and loan approval likelihood. This process involves assessing income, expenses, credit score, and financial history.
- Sales Contract: Thoroughly reviewing the sales contract before bidding is essential. Legal counsel is recommended if clarification is needed.
- Research: Properties are often sold "voetstoots" (as-is), meaning the buyer is responsible for any existing faults. Outstanding municipal rates, taxes, and levies may also become the buyer's responsibility. Conducting thorough research, including comparative market analysis, is recommended.
- Conditions of Sale: The Conditions of Sale document should be carefully examined before participating in an auction, as these can be amended up to the auction date and may include important clauses such as interest accrual and existing lease agreements.
The Auction Process
Arriving early at the auction allows attendees to hear the terms and conditions read aloud. Bidders should be prepared to finalize the purchase if they make the winning bid. The fall of the gavel signifies a binding agreement. Buyers should be aware of potential interest clauses on the winning bid price until transfer of ownership. Existing lease agreements on the property must be honoured.
