Author: Ewan O’Reilly
You may have considered purchasing property on auction or heard of friends or family that have done so and have decided to try your hand at it. Finding properties on auction is quite simple and such properties are usually listed online and can be found with a quick Google search.
There is more than one type of auction with the most common type of auction being a Bank auction. There are also voluntary auctions and Sheriff’s auctions.
The Bank will place a property on auction where the lender is in arrears with bond repayments. The Bank arranges the auction on behalf of the lender and the proceeds of the sale are used to cover the outstanding amount on the bond.
These auctions are similar to bank auctions, however, the Bank institutes motion proceedings and make application to court for consent to auction the property. The Bank will usually do so when they are not able to recover any monies from the lender.
The Seller places his/her property on auction voluntarily with the idea accepting the highest bid.
If you are intending to bid on an auctioned property, you will need to have a bidder’s card. You will not be able to bid or conclude a purchase without a bidder’s card. These cards can be obtained by online on the relevant website or at the venue by submitting the necessary FICA documentation such as an Identity document and proof of address. In most cases a registration fee is paid that is refundable (should you not have made any purchase at the auction)
Inspection and non-inspection:
Some auctions allow for home/property inspection however you will most likely find that there are more auctions which do not allow for home/property inspection. There are obvious risks when purchasing property which you have not yet inspected. However, whether you have inspected the property or not prior to your purchase, the properties on auction are sold ‘as is’ or ‘Voetstoots’. Voetstoots means that you have purchased the property in its current state and that you have taken full responsibility for it. You will not be able to enforce a subsequent claim against the seller in respect of that property.
Conditions of Sale:
A good practice is to request and view the conditions of sale. Conditions that are typically included are conditions relating to VAT, administration fees, registration fees and so on. The purchase price after a successful bid does not constitute the entire amount which you are responsible for paying and it is important to consider and plan for extra expenses.
A condition of sale can also inform you of a lease agreement that is still in force. Such a lease agreement will need to be upheld by the purchaser and may be undesirable as some purchaser’s would prefer a property with no tenants.
Make educated decisions:
As a potential purchaser, you should be asking relevant questions and be asking for relevant documentation, especially in instances where you are unable to inspect the property. You may ask the auctioneers for building plans, a copy of the title deed or a zoning certificate where relevant. These documents may assist you in obtaining more information on the property and can help you determine whether you should bid. It is also important to note that the purchaser will be liable for outstanding rates and levies.