By: Natasha Archary
The popularity of auctions in South Africa has grown tremendously over the years, with the many people in search of bargains and good deals in these tough economic times. Whether it’s a foreclosed house, a repossessed car or appliances or art, it’s important to have a basic understanding of how auctions work.
What are auctions?
Auctions are a public sale in which goods or properties are sold to the highest bidder. To be on the safe side of any sale, always make sure you know what you are buying.
When you take part in an auction you need to familiarise yourself with the terms and conditions including the deposit amount and the methods of payment as hidden fees have a way of creeping up on you. A buyer’s guide and/or the catalogue on various auction websites usually have all the relevant information.
It also helps to attend a few auctions before committing to make a purchase, this will allow you see trends and insight of how the “game” is played.
Here’s a quick guide to auctions:
Bidding
Making a bid is when you show interest in the item on offer for the price that’s called out.
Before you make a bid of payment make sure you register early and read the conditions of sale and also be aware of VAT and commission protocols.
Due diligence before a sale
- Inspect any property in which you are interested well before the auction date. Remember that properties are sold “voetstoots” (which means “as is”).
- Get a copy of the Conditions of Sale, know exactly what is being offered before you commit.
- Prepare your finances prior to bidding, this will save you a lot of unnecessary headaches.
- Gather as much additional information as you can about the property and the area ahead of the auction.
At the auction
- Register as a bidder, you will need all the relevant documents during the registration.
- Pay attention if there’s any amendments or additions to the Conditions of Sale
- Request a copy of the Order of Sale sheet, make sure you are well seated and ready for the property that interests you.
Also read: Expert advice on whether you should buy a car on auction
Here are some important Auction Terms you should familiarise yourself with:
Commission – The amount the auctioneer charges in return for organising a successful sale. It is usually paid by the buyer.
Fall of the Hammer – Signals the end of a period of bidding for a particular item or property at an auction.
Gearing – The process of funding the acquisition of assets through borrowing, such as buying a property by getting a home loan from a bank.
Lot Number – The number assigned to a certain item or property at an auction.
Non-Suspensive Sale – A property sale which is not contingent upon the buyer being able to obtain mortgage finance.
Conditions of Sale – The terms under which a property is being sold at auction.
Order of Sale – The order in which lots at an auction will come up for sale. Properties in Possession (PiPs) – Properties that have been taken back by a bank following a legal process resulting from owners defaulting on their home loans.
Proxy – A stand-in or a person authorised to perform certain actions on behalf of another, like bidding on their behalf at an auction.
Reserve Price – A minimum price for any item or property on auction that has been agreed on by the seller and the auctioneer.
Sale in execution – A sale of goods or properties that have been attached by a sheriff following a judgment for debt obtained by a creditor.
Surety – A pledge given to protect the recipient against loss in case the terms of a contract are not filled.
Title Deed – The legal document that proves ownership of a particular property.
Voetstoots – A terms that describes the sale of a property exactly “as is” or with all its faults, and where the seller has no legal responsibility for its condition.
Before buying a car at an auction, keep in mind:
- Ensure that the auction dealer is reputable and not a fly by night.
- Read all the terms and conditions of the auction and the car that you are purchasing.
- Inspect the vehicle that you are interested in before buying, because once you have bought it, you can’t return it to the dealer, unless there are serious problems with it and your contract makes room for that.
- Ask if there are any problems with the car before purchasing it. Be wary of buying cars that are marked ‘sold voetstoets’ (as is)
- Don’t be an impulsive buyer, rather decide on a budget and stick to it.
- Don’t forget to check all of the car’s documents including roadworthy certificates and if the license fees are up to date.
Also read: These businesses have received the most consumer complaints in SA
