BIDS

Auc­tion­ing your home – or, in­deed, buy­ing your home on auc­tion – offers sig­nif­i­cant fi­nan­cial and mar­ket­ing ben­e­fits

Destiny - - Property - BY Denise Mh­langa

In SA, buy­ing prop­erty on auc­tion is still a rel­a­tively new prac­tice. People of­ten as­so­ciate prop­erty on auc­tions with re­pos­ses­sions, tra­di­tion­ally con­ducted by Sher­iffs of the Court, so many of them be­lieve that such prop­er­ties are al­ways great deals. How­ever, while auc­tions do give pur­chasers a chance to buy a prop­erty they couldn’t other­wise af­ford, the per­cep­tion that these events of­fer bar­gains is false, says Brid­get Buys, Busi­ness De­vel­op­ment Man­ager: Real Es­tate at Tirhani Auc­tion­eers. “The prin­ci­ple of the auc­tion method is simple: when bid­ders com­pete, prices go up and sell­ers win,” she ex­plains.

Auc­tions work by re­search­ing the de­mo­graph­ics of the tar­get mar­ket and match­ing the prop­er­ties to that mar­ket. This is done by ag­gres­sively mar­ket­ing the prop­erty to as many po­ten­tial buy­ers as pos­si­ble with the in­ten­tion of gen­er­at­ing in­ter­est in the auc­tion through plat­forms such as news­pa­pers, mag­a­zines, street signs, ban­ners, SMSs to buyer data­bases, so­cial me­dia and auc­tion house web­sites.

“This cre­ates com­pe­ti­tion for the prop­erty with the pur­pose of en­hanc­ing the sell­ing price,” says Buys.

Ac­cord­ing to Joff van Ree­nen, Lead Auc­tion­eer at High Street Auc­tions and PR Di­rec­tor for the SA In­sti­tute of Auc­tion­eers, auc­tions are prop­erty sales on steroids, so both buy­ers and sell­ers need to work with rep­utable and reg­is­tered auc­tion houses who have mar­ket knowl­edge and ex­per­tise about the process and the prop­er­ties be­ing bid for.

Van Ree­nen says there are live auc­tions con­ducted in pub­lic with bid­ders com­pet­ing openly (tele­phone bids also form part of this), as well as online auc­tions, where bid­ders sub­mit their offers on an auc­tion com­pany’s web­site and have to ad­here to spe­cific open­ing and clos­ing dates.

With auc­tions, po­ten­tial buy­ers or bid­ders must pre-reg­is­ter (for a fee) and en­sure they com­ply with the Fi­nan­cial In­tel­li­gence Cen­tre Act in order to qual­ify to par­tic­i­pate in the sale. They also need to sign the auc­tion sale doc­u­ments which, un­like stan­dard con­veyanc­ing doc­u­ments, have fewer sus­pen­sive clauses be­cause they’re pre-approved sales.

Reg­is­tra­tion fees are re­funded to un­suc­cess­ful bids and the fees for win­ning bids be­come part of the prop­erty de­posit, which must be paid on the day to se­cure the prop­erty, with guar­an­tees due within 30 busi­ness days of ac­cep­tance of the of­fer.

“Bid­ders need to fac­tor in the 10% com­mis­sion fee, over and above the pur­chase price, be­cause at auc­tions, buy­ers – rather than sell­ers – pay the pro­fes­sional ser­vice fees,” ex­plains Van Ree­nen.

He adds that un­der South African law, the auc­tion model is the only chan­nel of sale which is im­me­di­ately bind­ing on the top bid­der and is ex­empt from the “cool­ing-off pe­riod” in the Con­sumer Pro­tec­tion Act.

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