Online auctions continue to gain traction as one of the rising trends in the property sector. Whether it’s a commercial property such as an office block or warehouse or a home in a sought-after suburb, auctions are proving to be a transparent, efficient way to sell an asset in 2022.
As an increasingly mainstream selling method in South Africa, John Jack, CEO of Galetti Corporate Real Estate adds that an online auction’s popularity lies in its ability to provide easy access to a large pool of engaged potential buyers. “It also ensures competitive pricing and is a faster way to sell a property in comparison to the traditional method of sale.”
What You Need to Know
Jack sheds light on commonly asked questions by both buyers and sellers around online auctions:
Types of Auctions: “Bank auctions and sheriff auctions are used in an attempt to recover unpaid bonds and bills by homeowners. However, more online auctions are coming to the fore and can best be described as auctions in which a seller opts to sell their property via online auction rather than the traditional method of sale.”
Are Bidders Prequalified?: “It’s the potential bidder’s responsibility to request prequalification from a bond originator or a bank prior to registering to placing a bid. This proves that they have the necessary approvals in place - unless financing is not required and it is a cash offer.”
Is an Online Bid Legally Binding?: “Yes. If your bid is successful, you will need to sign a Condition of Sale and put down a deposit of at least 5% (less the amount that you paid to register).”
What is Voetstoots?: A property sold on auction will be sold ‘voetstoots’. “It simply means that the property is sold as-is and that the seller is not liable for any defects after the sale,” explains Jack.
Tips to Prepare a Property for Online Auction
Potential sellers wishing to sell their property at an online auction rather than through the traditional sales method should consider the following tips:
Find the Right Company to Partner With: “It’s vital that one does their homework before listing their property with a broker. Do your due diligence: find out more about the broker (and their respective company’s) track record, make sure that they have a solid database of potential buyers in your target market; make sure that they have a strong marketing strategy to promote your property and are willing to do the ‘legwork’ to finalise the sale.”
If the Price is Right: “Work with your broker to determine a realistic end goal. Have a sales price in mind and convey this to ensure that you attract the right pool of buyers and sell for the desired price.”
Get the Property Auction Ready: Like any property sale, an online auction property should be well maintained and handed over in the same manner that it was advertised in. “The better the property looks, the higher your chances of achieving your reserve price (or above). Make sure that the property is well-kept and is ready for handover.”
Keep the Lines of Communication Open: “It’s your broker’s duty to communicate with you throughout the process. They should be aligned to your goals and you should have a clear understanding of the number of registered bidders, the agenda for the day, the procedures etc.”
Tips to Buy a Property on Online Auction
Jack says that potential bidders should do the following to prepare for online auction:
Virtual Viewings: “Online auctions allow you the opportunity to view the property virtually. Be sure to do your research on the property and the area. Request copies of the title deed, property plans, zoning certificates etc. where relevant” says Jack.
Conditions of Sale: Make sure that you familiarise yourself with the conditions of sale in advance. “A contract of this nature is designed to protect both the interests of the buyer and the seller, however, it’s advisable that you have a good understanding of the Conditions of Sale prior to putting in a bid as this is legally binding.”
Finances: “Ensure that your finances are in order and that you are prequalified for a bond prior to bidding on a property. Finally, keep in mind that you will be liable for an upfront deposit and be sure to factor in transfer duties and legal fees” he concludes.