Buying a house through an estate agent is the conventional way to buy property, but true bargains are often sold through sheriffs’ auctions. A reader has asked our panel of experts about buying a property under the hammer. reports
Samukelisiwe Dlamini is a 27-year-old single mother who works as an attorney.
“I decided to buy property because I do not think that it is wise to rent. I have been renting since February this year and I hate it. I think it is time for me to buy my first home.
“As an attorney, I have been exposed to the sheriff’s office and its workings. Houses are repossessed from people who are unable to keep up with the bond repayments – or levy payments if they reside in a complex.
“The houses of deceased people are sometimes also auctioned through the sheriff’s office. It is cheaper to purchase a house from the sheriff’s office than through an estate agent.
“A house on the market for R900 000 can easily sell for R500 000 through the sheriff’s office. For me, it makes so much sense to acquire a property using this avenue.
“I am a single mother of a 14month-old boy. I need us to have a home to call our own. The money I am currently using for rent will go towards monthly bond repayments.” Properties can be bought at great value when attending such sales in execution. The bank cannot accept or decline offers on these properties, as the bank is not the legal owner. Ndlovu says: “The important thing is the ability to repay monthly instalments on a loan and the variables [interest rate, loan term, loan amount, monthly fees and insurance] that make up the monthly repayments.
Adds Nel: “It’s best to know how much you can qualify for before buying a property. The loan amount is dependent on your income and expenditure, as well as how you manage your current credits.” Finance from banks is available, up to a maximum 100% loan-to-value ratio, but would be dependent on the value of the property, as well as an individual risk assessment of both the property and the applicant – and limited to what
the client will be able to afford.
How to buy a property on sheriff’s auction
You are required to pay a deposit to the sheriff to allow you to bid. The deposit will be for 10% of the expected bid price.
It is advisable for you to make sure that you have pre-approval from your bank for the mortgage, as this minimises your risk of losing the deposit if you are unable to raise finance.
Should you be the winning bidder, you will be expected to obtain final loan approval from a financial institution within a timeframe set by the sheriff.
The sheriff’s commission is payable by the successful buyer at the auction and is based on the purchase price, calculated as follows: 6% on the first R30 000, plus VAT; and 3.5% on the balance of the price. The minimum commission payable is R440, plus
VAT, and the maximum is R8 750, plus VAT.
Conditions of sale
A sale agreement is signed by the sheriff and the buyer.
The buyer’s responsibilities include:
Paying a deposit of 10% of the purchase price in cash, bank-guaranteed cheque or electronic transfer in the sheriff’s office, immediately on buying;
Paying commission on the date of purchase; Guarantees for the balance of the purchase price, together with interest, within 14 or 30 days;
The payment of any outstanding levies, water and electricity, rates and taxes; and
Occupation of the property, which includes the eviction of the former owner, tenants or other persons on the property.
Further, in the case of any breach of the agreement, the sale may be summarily cancelled by a judge on request of the sheriff after due notice to the purchaser, and the purchaser shall be responsible for any loss sustained by reason of default. If you have any property-related questions, send them to us at email@example.com, or SMS us on 35697 using the keyword HOME. Include your name and contact details. Each SMS costs R1.50