Purchasing a Property on Auction
In South Africa, the popularity of property auctions have increased in recent years, offering a suitable alternative for prospective buyers. Regardless of this trend, it is important to remember that auctions may not be a good fit in every scenario.
It is recommended that you have a basic understanding of conveyancing and property auctions to be able to make informed decisions. Auctions are regulated by Section 45 of the Consumer Protection Act No. 68 of 2008, and stipulates requirements for the auction process that must be complied with.
Property Auction Types
There are at least two kinds of property auctions in South Africa. The different types include, sheriff auctions, and voluntary auctions.
We will briefly discuss each.
This type of auction involves properties sold in execution as a result of a legal action instituted against the owner of the property.
Where a property owner is in arrears with a significant amount of debt the Bank or company which he owes the money will institute legal action in order to recover the debt owed. The Court in which jurisdiction the property is located will issue a judgement ordering the property to be attached by the Sheriff of the Court where after it will be sold at a Sheriff’s auction.
These properties are sold as ‘voetstoots’, or ‘as is’. The buyer will be responsible to pay a deposit amount immediately to the Sheriff of the Court which is usually 10% of the Purchase price and he will also be responsible to pay the Sheriff’s commission as well as any outstanding monies owed to the Municipality and Body Corporate or HOA, if applicable, regarding the rates, taxes and levy amounts during the conveyancing/transfer process.
Voluntary auctions occur when a seller willingly puts their property up for auction in hopes of getting the best possible price. This type of auction favours the seller as it can introduce the seller to a bigger buyers market.
If your bid to buy the property is successful, and isn’t subject to approval, you must sign the ‘conditions of sale’ to confirm your acquisition of the property. You will then need to pay a deposit which is a percentage of the purchase price (minus the amount paid at registration), as well as the auctioneer’s commission, which is typically 10% of the purchase price plus VAT. The remaining sum will be due only at a later stage, as detailed in the conditions of sale. Before leaving the auction site, make sure that you know when the property’s risk is transferred to you, as you will need this information for insurance purposes. This may happen when the transfer is registered or as soon as the auction ends.
Important to Remember at an Auction
Prospective buyers need to be properly prepared and ready to bid before participating in an auction. There are a few things that one should do ahead of the auction day to be ready to partake.
If possible, arrange to view and thoroughly examine the property in preparation for the auction. Ideally, you want as much information about the property and the surrounding area as possible. In a private auction, copies of relevant documents such as the title deed, property plans, zoning certificate should be available from the auctioneer upon request. Familiarise yourself with the terms and conditions of the sale.
On the day of the auction you will need to provide proof of residency, either your Identity document or passport, whichever is applicable. You will also need to pay the registration fee, which will be refunded if you decide not to bid or if your bid is unsuccessful. As a bidder you will be assigned a number, also called a paddle, which you may use to bid during the auction.
Please remember the ‘conditions of sale’ in both types of auctions is a legally binding purchase contract. Should you fail to perform as stipulated in the contract it will be seen as breach of contract and the seller will have legal remedies to pursue legal action against you.
Alan Levy Attorneys: Conveyancing Attorneys in Johannesburg
Before making the decision to buy a property at an auction, it is best to consult with a conveyancing attorney who will be able to provide you with suitable options for your unique circumstances. They may also be able to give you valuable insights about conveyancing and property auctions to allow you to make an informed decision.
This article is not intended as legal advice, and serves to educate readers on conveyancing and property auctions in South Africa. Should you be interested in attending a property auction, it is advisable to consult an experienced conveyancing attorney. Contact Alan Levy Attorneys for exceptional conveyancing and notarial services tailored to meet your needs.