THINKING OF BUYING PROPERTY AT AN AUCTION?

THINKING OF BUYING PROPERTY AT AN AUCTION?

Here are 5 things to consider before attending and bidding at a property auction.

• You need to have your finance pre-arranged. You will also be required to pay a deposit upon arrival at the auction sale if you intend to cast your bid. Should your bid be successful, a portion of the purchase price may be required immediately and the rest called for within a set number of days, according to the specific contract.

• If possible, try to arrange to view the property before the auction sale. Most properties on auction are sold "voetstoots" ("as is"). Identify any damage to the property or work that needs to be done, as this will impact your decision once the bidding opens.

• Properties at an auction may, or may not have a reserve price. A reserve price is the minimum amount that the seller will accept for the property. If the bids received do not reach the reserve price, the seller is not obliged to proceed with the sale.

• Ask the auctioneer for a copy of the contract of sale prior to the sale. There are various types of auctions so make sure you understand everything in the contract.  There might be conditions whereby you are obliged to take on existing tenants or become responsible for the outstanding municipal accounts, for example.

• A winning bid at an auction is legally binding and cannot be retracted later without potential financial loss.

Auction Terms

Fall of the Hammer - Signals the end of a period of bidding for a particular item or property at an auction and means no further bids for that item or property will be accepted. 

Lot Number - The number assigned to a certain item or property at an auction.

Non-Suspensive Sale - A property sale which is not conditional upon the buyer being able to obtain mortgage finance, for example, or having to first sell his existing property.

Order of Sale - The order in which lots at an auction will come up for sale. This will not necessarily be numerical, as similar items with widely varying lot numbers may be grouped together for convenience. 

Proxy - A person authorized to perform certain actions on behalf of another, like bidding on their behalf at an auction. The word may also refer to the document authorizing the stand-in.

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