Real Estate Investor Magazine South Africa December - January 2014 | Page 38

ACQUIRING

BY ANGIE REDMOND

Bargain Properties At Auctions
Tips to ensure your prosperity

Prepare yourself
• The first thing you should do is view and inspect the property. The property will be sold ‘voetstoots’, so what you see is what you will be getting. If there is damage or
work to be done, it’s best to know before you bid.
• Research the property and the area before you bid. Does the area have everything you are looking for? Companies like Lightstone will be able to show you the average
prices paid in that area, and the ownership history of the property. You don’t want to find out after you have bought the property that it was the site of a mass murder.
• You need to get a copy of the conditions of sale for the properties you are interested in. The auction bid that wins is legal a nd binding, so before you buy ensure that you
know if you are inheriting tenants or outstanding bills.
• Once you have decided to bid on a property, you need to arrange the finance ahead of the day. If you are going to apply for a mortgage, you should do so ahead of time.
Once you win the auction you will be expected to pay the deposit on the purchase price and the auctioneer’s commission, inclusive of VAT on the same day.
• If for whatever reason you cannot physically be present, you can arrange to bid by phone. You need to complete a proxy form and this allows the auctioneer to record
your bids. You will also need to pay the refundable auction registration fee and may be asked to put a good faith deposit down in the event that you win, which will be
refunded if you are not successful.
On the day
• On the day of the auction, you need to register as a bidder, get a number and a paddle for the auction you want to attend. Make sure you have your ID, proof of
address (a municipal bill will do), the registration fee, which is refundable if you decide not to bid or don’t win the bid. Even if you are simply bidding on behalf of a
friend or client, you still need to register and have proof of your authority to bid. It’s also worth noting that in the event of you being the bidder who is successful, you
may have to sign an undertaking making you responsible for going through with the purchase, even if the other person drops out.
• Now you are ready to get bidding, get a copy of the order of sale and
find out the lot number of the property you want to bid on. Once you are
there, make sure you are in a position where the auctioneer can see you,
and be ready to put your paddle in the air when it’s time to bid.
• Auctions can be conducted with or without a reserve price, a minimum
price known by the seller and auctioneer. Absolute auctions are auctions
where it is literally the highest bid that wins. A lot of property ‘in
execution’ is sold this way. In cases where the property has a reserve price
that isn’t met, the owner will confirm the sale after the auction.

After the auction
• Once your bid has won, you own the property and cannot negotiate the
price if you discover faults.
• If you default on the sale after the auction, the property seller can take
legal action against you, and you can lose all the funds you have already
paid.
• You must also check when the risk of the property will pass on to you;
will it be on the fall of the hammer or on registration of transfer? If it is
straight away, you need to make sure the property is insured immediately.

RESOURCES
Michael James Auctions

www.reimag.co.za