This week, we’re focusing on property auctions. There are many types of property auctions, each having their own rules. The most likely auction you’ll attend is a bank auction. You may recognise the term, distressed sales, this is where the bank forces a property owner (who is in significant arrears on their bond) to place their property on auction. In most cases you could pick up a very reasonably priced property.
Then, you get Sheriffs auctions, these are where you’ll find the best deals. When the bank sees no chance of recovering their funds, they will apply to the court to attach the property and sell it to the highest bidder as it stands. This is called “Sale In Execution” and is conducted by the sheriff of the court. Look out for these, you can pick up property at a big discount.
Just do your homework first, you are purchasing the property “as is” so you may be responsible for any outstanding rates and taxes, you’ll probably have to evict any tenants, there may be delays in transfer and sometimes you may not get easy access to the property before the auction to confirm any details – so you are taking a risk. Also, if your offer is not acceptable to the bank – they won’t sell it.
If the bank opts to not sell the property, in other words, they decide that the offer is too low for the value of the property. The bank may buy the property at the amount owed to them. By this stage, the property has incurred significant costs, legal fees, transfer fees, evicting the errant occupants, making good the damage and securing the vacant property. The bank will wait until the market is more favourable and then sell the property including all incurred costs. This is called “Property In Possession”.
A growing trend in South Africa is the voluntary auction, where the seller opts to sell their property via auction. This is often the best option for a seller with a property in high demand, as you’ll put many interested buyers in one place to bid against each other driving the price up. The seller sets a reserve price and the sale is subject to his acceptance.
Mark Kleynhans, Director of Aucor Property comments, “Over the past few years we have seen the method of auctions growing in popularity as a preferred way to buy and sell property, whether it be commercial, industrial, retail or residential. Buyers recognise the value of coming to auctions and purchasing property through this mechanism. The sale is clean and non-suspensive and is driven by what the true market value of the property is.”
As always, with any auction, the key is to know what you’re in for should you bid, because if you’re the highest bidder, you’re stuck with it. Also remember, if you’re serious, make sure you have the proper guarantees in place – if you can’t fulfill your purchase, you could lose your deposit or even be liable for sheriffs fees or auctioneers commission.