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