Is it safe to buy a home that's on auction?
The auction industry is still not officially regulated by an ombudsman, and so the South African Institute of Auctioneers (SAIA) manage and address any complaints sent in from the public.. John Cowing, chairman of SAIA’s board of directors said that there have been no newly reported scams.
“SAIA and its members strive to manage, and address reported irregularities as soon as possible to ensure no serious damage to buyers or its members. We are glad to report that no scams were recently reported to SAIA,” said Cowing.
In order to make sure an auctioneer is legitimate, a potential buyer should check with SAIA and the Estate Agencies Affairs Board (EAAB) to confirm the auctioneer is registered to sell a property.
“All prospective buyers are advised to utilise the services of SAIA registered auctioneers,” said Cowing.
What to look out for
All the rules for an auction can be found on the auctioneering website, or can be emailed on request of the buyer. Furthermore, an interested bidder will pay a refundable deposit to be able to bid on the auction.
However, before a buyer can start bidding, they need to register for the auction. “The bidder needs to register at the auction and must provide the necessary FICA documents, which are a proof of ID and residence (utility bill). It is important to note that if you are not registered as a buyer you are not allowed to bid in terms of the Consumer Protection Act (CPA),” said Nico Maree, executive director of SAIA.
A buyer should find out if they are liable for any outstanding municipal costs, rates and taxes as well as the auctioneer’s fee. It is possible to find out if there is any historic debt on a property through the council.
Historic debt is any debt associated with a property that has not been paid and this can include rates, electricity and water. When a house is sold and ownership has changed, the debt attached to the property changes hands too.
Maree also advised that buyers visit the property on open day to make sure they know what the market related prices of similar property in the surrounding areas would be. This would help the buyer make a more informed decision when it comes to bidding on a property.
“Buyers should ensure that they have the necessary funds available to buy the identified property. Make sure you are able to pay between 10% to 15% deposit on the fall of the hammer in accordance with the conditions of sale,” said Maree.
The balance of the purchase price is usually payable within 30 days from date of acceptance of confirmation of the seller by way of bank guarantee or cash. Maree advises to make sure of the conditions of sale.
When going to an auction, a buyer should make sure they have a budget and stick to it, as not to overspend. “Determine the maximum amount you would like to pay and keep to your budget. Be careful not to get caught up in buyer’s frenzy, or you may have buyer’s remorse,” said Maree.
Costs of auction sales
“The purchases price plus VAT or transfer duty will be applicable,” said Maree.
Furthermore, a buyer should find out about who would be liable for the commission fees of the sale. The buyer can request that the auctioneer announce who would be responsible for the various commissions before the auction begins.
Occupational rent – the rent a buyer pays if they move into a house before the transfer has taken place – is something the buyer should be aware of. “Normally the occupational rent will be applicable from the date of confirmation or the date from which occupation is allowed until date of registration. They buyer should make sure what the occupation rent or interest is,” said Maree.
Additionally, rates and taxes on the property will be paid from the date of confirmation, but this is also depending on the conditions of the sale, said Maree.
Where to find an auction
Maree explained that there are various marketing platforms that property auctioneers use to market an auction.
Online advertising is one way to for a buyer to find an auction. The auctioneer’s website, the SAIA website, auction apps or property advertising platforms will advertise various different auctions.
Auctioneers also use property magazines and government gazettes to advertise their auctions. Furthermore, there is a buyer database where potential buyers can receive emails or SMS alerts by registering on the SAIA database.
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