Buying an auction property can be an exciting opportunity, whether you’re a seasoned investor or a first-time homebuyer. Here’s a handy guide to navigating the auction process.

Understanding the Auction Process

1. What is a Property Auction?

An auction property sale is a public bidding process where properties are sold to the highest bidder. Auctions can be held in person or online and are typically managed by estate agents or auction houses.

2. Types of Auctions

  • Absolute Auctions: The property is sold to the highest bidder regardless of price.
  • Reserve Auctions: The seller sets a minimum price. If the bidding does not reach this reserve, the property may not be sold.
  • Sheriff’s Auctions: Properties are sold by the sheriff of the court, typically as a result of a court order to recover debt.

Preparing to Buy at Auction

3. Researching Properties

Before the auction, conduct thorough research:

  • Attend Open Houses: Visit properties beforehand to assess their condition.
  • Check Local Listings: Browse auction websites and local real estate listings for upcoming auctions.
  • Understand Market Value: Analyse similar properties in the area to gauge fair pricing.

4. Finding Details of Upcoming Auctions

To stay informed about upcoming property auctions, consider the following sources:

    • Online Auction Platforms: Websites like WH Auctioneers, Aucor and High Street Auctions often list upcoming auctions and provide property details.
    • Classifieds: Local newspapers and online classified ads frequently feature property auctions.
  • Facebook MarketPlace Auction houses advertise upcoming auctions on the market place
  • Government Gazettes: Sheriff’s auctions are often advertised in the Government Gazette, which provides official notifications about property sales.
  • Estate Agents and Auction Houses: Subscribe to newsletters or follow social media accounts of estate agents and auction houses to receive updates on upcoming auctions.
  • Networking: Join local property investment groups or forums where auction details may be shared among members.

5. Financial Preparation

  • Get Pre-Approved: Secure financing in advance. This shows you’re a serious buyer and can streamline the purchase process.
  • Budget for Additional Costs: Besides the purchase price, factor in auction fees, transfer duties, and potential renovation costs.

6. Securing Finance

When purchasing at auction, it’s crucial to have your finances in order:

  • Speak to Your Bank or Lender: Get pre-approval for a mortgage if you plan to finance the purchase. Be aware that some lenders may have specific requirements for auction properties.
  • Consider Bridging Finance: If you need to act quickly, bridging finance can provide temporary funding until you secure a mortgage.
  • Prepare Necessary Documentation: Ensure you have all required documents ready, such as proof of income, credit reports, and identification.

7. Read the Auction Terms

Familiarise yourself with the auction terms and conditions. Each auction house has its own rules, which may include:

  • Registration requirements
  • Deposit amounts
  • Auction fees
  • Conditions of sale

Bidding at the Auction

8. Register to Bid

Most auctions require you to register beforehand. Bring identification and proof of your ability to pay the deposit.

9. Bid Wisely

  • Set a Maximum Limit: Decide beforehand how much you are willing to spend.
  • Stay Calm: The excitement of bidding can lead to overspending. Stick to your budget.
  • Use Clear Signals: If bidding in person, make sure your bids are clearly indicated to the auctioneer.

10. Winning the Bid

If you’re the highest bidder, congratulations! You’ll need to:

  • Pay a deposit (usually around 10% of the purchase price) immediately at the fall of the hammer.
  • Sign a sale agreement immediately after the auction.

Fees to Be Paid at the Fall of the Hammer

11. Immediate Fees

When the auction concludes, several fees are typically required:

  • Deposit: Usually 10% of the final bid amount. This is paid immediately to secure the property.
  • Auctioneer’s Fees: Be aware that there may be additional fees charged by the auction house, which can vary but typically range from 5% to 10% of the purchase price, plus VAT.
  • Transfer Duty: Payable to the South African Revenue Service (SARS), this is calculated based on the purchase price and must be settled before the property can be transferred into your name.

Understanding Sheriff’s Auctions

12. What are Sheriff’s Auctions?

Sheriff’s auctions occur when a court orders the sale of a property to satisfy a debt. This can happen in cases of mortgage default, where the bank seeks to recover funds. The sheriff is responsible for executing the sale, ensuring that it complies with legal requirements.

13. Key Features of Sheriff’s Auctions

  • Legal Process: Properties sold at sheriff’s auctions typically have been through a legal process, which means they may come with complications, such as existing occupants or liens.
  • Research Required: It’s essential to research the property’s history and any legal implications before bidding.
  • Documentation: Ensure you have the necessary documentation to register and bid, as outlined by the sheriff’s office.

After Winning the Auction

14. Finalise Financing

Ensure your financing is in place to cover the remaining balance. Most auctions require full payment within a specified time frame (often 30 days).

15. Conduct Due Diligence

  • Property Inspection: If you haven’t already, conduct a thorough inspection to uncover any hidden issues.
  • Check for Liens: Ensure there are no outstanding debts or liens attached to the property.

16. Transfer of Ownership

Work with a conveyancer to handle the transfer process. They will ensure that all legal requirements are met and that the property is legally transferred to your name.

Voetstoots and Evictions

17. Understanding Voetstoots

In South Africa, auction properties are often sold “voetstoots,” which means “as is.” This legal term indicates that the buyer accepts the property in its current condition, with all its faults. Therefore, it is crucial to conduct thorough inspections prior to bidding, as you may not have recourse for hidden defects discovered after the sale.

18. Evictions and the PIE Act

When purchasing a property that is occupied, be aware of the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act (PIE Act). This legislation provides protection for tenants and unlawful occupiers, making it crucial to understand the following:

  • Eviction Process: If the property is occupied, you cannot simply evict the occupants without following legal procedures. This typically involves obtaining a court order, which can be time-consuming and costly.
  • Tenant Rights: Under the PIE Act, even unlawful occupiers have rights. You must give them appropriate notice and a chance to respond before initiating eviction proceedings.
  • Time Considerations: The eviction process can take several months, depending on the circumstances. Factor this into your plans if you’re considering purchasing an occupied property.

Additional Tips

  • Consult Professionals: Consider hiring a property attorney or real estate agent familiar with auctions to guide you through the process.
  • Be Mindful of Risks: Auction properties are often sold “as is,” meaning you may inherit problems. Always do your due diligence.
  • Stay Informed: Attend property auction events to gain insights and learn from experienced bidders.

Auctions can offer properties at below market value, but they also come with their own set of challenges. The key is to ensure you are well familiarised with the process.