Tyes of Property - Auction

A property auction is where immovable (or movable) property is placed up for a public sale which is facilitated by an auctioneer where the property is then sold to the person who made the biggest bid thereto. Bidders need to register to receive a bidder’s card. For that, the bidders will need to provide their FICA documents, which includes their ID and proof of residential address. There is however no registration fee necessarily payable. Final bids are legally binding and cannot be withdrawn if you change your mind. The most common method of conducting an auction is onsite or online auctions.

Onsite auctions allow bidders to be at the premises on the day. They view the property before the auction, and then do the bidding. This is a better method due thereto that you would be able to view the property before you decide if you want to bid and buy the property. This is also more convenient for the seller seeing as nobody would view the property at inconvenient times for the seller.

Online auctions allow bidders from around the world to participate in real-time bidding over the internet. It is also possible to conduct online auctions, or to even combine the two methods. There are several categories of auctions which one should be aware of.

Types of property auctions

Voluntary Auctions

A voluntary auction, which is a strategic decision made by the seller to put bidders against each other with the hope of getting the fairest sale price. This type of auction is much faster than conventional sales, as it alleviates the long and slow negotiation period.

Bank Auctions (Distressed Auctions)

A bank auction is an auction, organised by a bank (Or other financial institution) on behalf of a seller in serious and irrevocable arrears on their bond/liabilities. These auctions are commonly referred to as distressed auctions and are done with the seller’s permission but prioritise speed over final sales price. As a result, bidders can often secure properties at below-market prices and have the added benefit of knowing any outstanding rates and taxes will be handled by the seller.

Sheriff’s Auctions (Sales in Execution)

Sheriff’s auctions happen when a bank is forced to take legal action against a property owner who has defaulted on their loan and is unwilling or unable to make due and proper payment, or to arrange a solution towards the outstanding debts.  The Cout will grant an order which allows the creditor to seize the debtor’s assets and sell them in order to recover the debt owed. The Sheriff of the court is responsible for carrying out the seizure of the assets and the auction process. In South Africa, sheriff auctions are regulated by the Sheriff’s Act of 1986.

Pros & Cons of auctions

Some of the pros to the auction process is that:

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

Some of the cons of such auction process is:

1. Auctioneers can pit purchasers against one another to try and get a better price for the seller;
2. 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;
3. The purchaser is normally responsible for the eviction of any existing occupants;
4. All the fees are payable in a specific and prescribed time or the sale is forfeited.

Despite the potential challenges, buying on auction remains one of the most exciting ways for savvy investors to secure unbeatable value. Property auctions in South Africa are not just a trend but a transformative force in the real estate landscape, offering a compelling alternative for those seeking efficiency, transparency, and value in their property transactions.