Properties sold on auction is not necessarily the bargain buy everyone seems to think it is. This is because the property on auction isn’t necessarily being sold due to financial distress. In today’s times, homeowners have turned to auction as a means of selling their property as soon as possible and for as a high a price as possible. When planning on buying a property on auction, it is important to do your homework and prepare. This is what you need to know about property auctions:
There are different types of properties that can be bought on auction, they include:
- Property up for sale by the owners themselves as a means of selling the property as quickly as possible.
- Sale in execution. This is a sale due to the financial distress of the property owner.
- Property in possession. Property that has been bought back by the bank, in other words, a repossessed property.
What to do before the auction:
Before the auction, there are certain things you can do to prepare, this includes:
- Viewing the property before the auction, as these properties are sold “as is”.
- Gather additional information on the property being auctioned ahead of time. Find out more about the area, local schools, facilities, asking price for properties in the said area etc.
- Make sure to have a copy of the Conditions of Sale. The reason being, before buying this property, it is important to know exactly what you are buying. You could be taking over accounts that have not yet been paid etc.
- If you are going to bid on a property, ensure that your finances are ready well in advance.
- Finally, if you cannot physically attend the auction, and want to bid by phone, you will have to organise this in advance.
What to do at the auction:
When arriving at the auction, there are certain processes that need to be followed before you can bid on the property, this includes:
- When arriving at the auction, you need to register to bid on the property. To register, you will need your ID, proof of residence, and the fee for registration.
- Go through the provided Conditions of Sale and ensure that no changes have been made to the document.
- Ensure that the auctioneer can clearly see you.
- If your bid is successful, you will be instructed to sign the Conditions of Sale as a means of confirming your purchase.
- You will then have to pay the auctioneer’s commission which is usually 10% of the purchase price plus VAT, as well as a deposit of 5% of the purchase price.
- You will need to have the funds shortly after the auction as this is a guarantee to the seller that you can purchase the property.
What will happen after the auction:
After the auction, if the buyer of the property is dissatisfied with the property for whatever reason, it’s too late. This is because auction properties are sold “voetstoots”, which means “as is”. This is one of the main reasons why it’s so important to see the property as part of your preparation before the auction. It’s also important to note that if the buyer defaults on the sale, the seller can take legal action and force the buyer to fulfil the contract. Before bidding on a property, it is important to make sure that you want to buy and can afford to buy the property being auctioned, as the breaching of contracts comes with serious financial and legal repercussions.
This article is a general information sheet and should not be used or relied on as legal or other professional advice. No liability can be accepted for any errors or omissions nor for any loss or damage arising from reliance upon any information herein. Always contact your adviser for specific and detailed advice. Errors and omissions excepted (E&OE)