Auctions are rapidly becoming a popular method to buy and sell immovable property in South Africa. This method has been historically used by financial institutions to assist owners of immovable property to sell when their current bond has fallen into arrears and the financial institutions are unable to recover these funds from the current bond holder.

In the prevailing market conditions, there is an upward trend for owners of residential and commercial property to make use of auctions to speed up the process of finding a suitable purchaser, alleviate additional costs when selling their immovable property and maximizing their purchase price.

The purchaser takes full responsibility to acquaint themselves with the property, and the inventory of the property, prior to bidding at the auction. All properties are sold voetstoots and the seller would not be legally responsible for fixing issues raised by the purchaser.

The different type of auctions are as follows:-

  • Voluntary auctions – where a seller has freely decided to put property on auction, hoping to play purchasers against one another. This type of auction usually favour’s the seller rather than the purchaser;
  • Bank auctions – where a bond holder has fallen behind on repayments but has been given the option to sell at auction, writing off any shortfall. This type of auction favours the purchaser, as it is arranged by the bank, the property is normally sold at a reduced price and the rates and taxes are normally for the seller’s expense;
  • Sheriff auctions – where a bond holder has been unable to continue with the monthly bond repayments and there is no prospect of these funds being recovered. The financial institution applies to the court to auction the property. This type of auction favours the purchaser as they can often purchase the property at a significant discount;
  • Property in possession auctions – when the bank buys a property back at a sale in execution and incurs all the costs involved. When they sell it on inclusive of all costs, it is a property in possession.

If you are contemplating the purchase of a residential or commercial property on auction, the following would be deemed benefits of going through an auction:-

  • The seller is fully invested in selling the property;
  • The seller is contractually obligated to transfer the property to the highest bidder;
  • Property bought at auctions eliminate lengthy negotiation periods;
  • There is less competition when buying at auction;
  • You can secure a decent price for the property.

The consequences of buying property at auction are as follows:-

  • You have limited time to view the property and inspect it for issues;
  • Auctioneers can pit purchasers against one another to try and get a better price for the seller;
  • The purchaser is responsible for outstanding rates and/or levies, which makes it critical for the purchaser to review the accounts to confirm if they are in arrears;
  • The purchaser is normally responsible for the eviction of any existing occupants;
  • You must be able to pay all the fees over in a prescribed amount of time or you will forfeit the sale.

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