How To Buy a house On auction In South Africa

Below is How To Buy a house On auction In South Africa

If you’re planning to buy a house at an auction there are a few things you should note. Here we distinguish between a voluntary auction, bank auction, sheriff auctions as well as property in possession, with everything you need to know to prepare you for buying a house at an auction.

Property investment should be the “bricks and mortar” of your investment portfolio, and a great place to create wealth and residual income. Like any venture, fortune favors the bold, so there is no time like now to get out there and make it happen. You will need to decide what property to buy as there are so many variables and much depends on your own circumstances.

To buy a house at auction you’ll need to attend a voluntary or bank auction and register to receive a bidder’s card and a sales catalog. You’ll receive this two to three weeks before the auction. The information pack will include the conditions of sale and copies of the title deed, site plans, zoning certificates, lease agreements, and rental schedules.

Let’s explore some of those.

Firstly there are different types of property auctions, so chose which type of auction you go to carefully.

Voluntary auction
In South Africa, there is a growing trend to sell your house through an auctioneer in a VOLUNTARY auction, with the prime purpose to get a better price for the property by playing buyer against the buyer in a live environment. 

These auctions can work well for the seller in an active property market but seldom work for the buyer. The seller has a reserve price and the sale is subject to the seller’s acceptance.

Bank auction
Look out for the bank auctions, also a voluntary auction (sort of), organized by the bank but where the distressed seller (who is significantly in arrears with his bond) is given an ultimatum to sell at the auction, subject to the bank accepting the bid.
In this case, most of the properties are sold at a discount and the bondholder agrees to write off the shortfall on the outstanding bond. (In fact, they give the seller an unsecured loan with soft terms for the shortfall) So in this circumstance, you are buying a home from a seller with all the normal warranties and on transfer, the rates and taxes will have been sorted by the seller. 

SHERIFF auctions
The ultimate source of great value property is of course the SHERIFF auctions. Where the bank is unable to rehabilitate the bondholder and they see no chance of recovering their funds, the bank applies to the court to attach the property and sell it to the highest buyer as it stands, called a sale in execution.

These transactions are executed by the sheriff of the court. They are not well advertised with poor turnouts and are often postponed. In most cases, the only party at the auction is the bank. 

The bank will let the property go at a big discount, often around 50% of value, and this is where the real opportunities lie. This is a great place to source realistically priced property, without the risks inherent in forced sales.

Can I finance a house at auction?

You can’t finance auctioned properties. There are loans available, and we will discuss them later, but in order to bid, you’ll have to prequalify by showing that you have cash available to complete the purchase, often on the same day as the auction.