How to Buy Property on Auction
A property on auction no longer means that the property is a bank repossession or a distressed property. Today auctions are quickly becoming the main avenue to sell property in South Africa. Although the vast majority of South Africans do not understand the process of how auctions are run and many people are intimidated by the auction process.
There are multiple types of property auction and these include the following: Properties by sale by the owners; sale in executions and repossessed properties.
Properties for sale by owners: Many sellers look to auctions instead of selling directly through the use of real estate agents because an auction is seen as a quicker sale. There is an auction or sale closure date.
Sales in Executions: These are also known as sheriff auctions in South Africa. This is when the property owner has fallen on financial troubles. Often banks will buy these properties.
Repossessed properties. When a bank buys a property during a sale in execution, these properties are then auctioned as a repossessed property.
The Auction Process
Properties on auction are usually advertised four to five weeks before the auction is to take place. The widest range of auctioneers and auctions can be see at theauctioneer.co.za. A viewing date will also be advertised for a potential buyer to take a look at the property on auction.
1. If you are interested in the auction, make sure that you register for the auction as soon as possible. The auction house will then put you on a database and will keep you updated if there are any changes to the auction process.
2. Once you have registered, you will receive information on the lot you are interested in. This will include the conditions of sale, copies of the title deed, site plans, zoning certificates etc.
3. It is beneficial for you to view the property before the auction. You should also talk to the auction agent to get more information on the properties and what the realistic price of the property should be.
4. Understand the costs involved: You are required to pay a deposit for an auction. All properties on auction have a 5% to 10% auction commission attached to the sold price. And the bid price exludes 14% VAT for which you are also liable for. Transfer Duties are also often for the buyers account.
5. Get finance pre approval: The purchase of a property on auction is not subject to the bidder obtaining a home loan first. The bidder will still be liable for the agreed price even if the bidder is unable to obtain a home loan. Get pre-approval from you bank before the auction takes place. You will therefore need a copy of your home loan offer from the bank in writing before the auction begins.
1. Come to the auction with the highest bid price you are willing to spend. The bid price that the auctioneer will call out does not include the commission or vat. Use the auction calculator to determine this: Auction Calculator
2. Place your bids. Be careful not to be caught up in the excitement of the auction and go beyond what you were willing to spend.
3. Do not place bids higher than the bids that the auctioneer is calling.
4. Make sure you are the highest bidder at the close of the lot. Should the property not sell on auction. The auctioneer will negotiate with the highest bidder.
Pay Attention to the Following:
1. In a sale in execution, be wary if the property is occupied. It will be up to the new owner to apply to the High Court for an eviction order. The legal process of evictions need to be followed carefully and legal costs can mount up.
2. Pay attention to signs of property neglect.
3. Pay attention to signs of theft and vandalism
It is recommended that when you view a property, that you take a witness and photograph the condition of the property. This will give you legal grounds should you need this at a later date.
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