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How to buy a house at auction: Everything you need to know

Auctions provide an opportunity to secure a property at a bargain price, but there are some factors you should be aware of.

How to buy house at auction

Article summary

  • Auctions present an opportunity to secure a property at a bargain price.
  • To attend an auction, you’ll need to secure a bidder’s card at the venue.
  • Auctioned properties are sold voetstoots (as is), so you’ll be responsible for repairs and outstanding levees.
  • You may not have an opportunity to inspect the property before the sale.

An auction is a great opportunity to secure a property at a bargain price. Furthermore, the purchase will go ahead quickly without a lengthy negotiation process.

How do I attend an auction?

You’ll need to apply for a bidder’s card at the venue, which is a quick and easy process as there’s no registration fee. All you need are your FICA documents.

Registering for a bidder’s card does not obligate you to make a bid. In fact, it may be a good idea to attend a few auctions as an observer so you can get an idea of how it works.

Know the different types of auctions

There are three types:

  • A voluntary auction is where the seller has freely decided to put the property on auction, hoping to get the best deal by playing buyers against each other in a live venue or online. These auctions usually favour the seller rather than the buyer.
  • A bank auction is organised by the bank, usually on behalf of a seller who is in arrears with his or her bond. This type of auction benefits the buyer as the property is sold at a reduced price, and the rates and taxes are handled by the seller.
  • A sheriff’s auction occurs when the bank is unable to recover the funds from the current bond holder, and instead applies to the court to auction the property. This is usually the best source of value for buyers as the properties are sold at a significant discount, sometimes up to around 50% of the property’s value.

Things to be wary of

  • The property is sold voetstoots, meaning as is. You’ll be responsible for conducting any repairs. You’ll also be responsible for outstanding rates and levies.
  • You won’t have the opportunity to inspect the property. You can try a drive-by viewing, but if this is not enough to set your mind at ease, you should ensure the auction you’re attending does allow for a home inspection.
  • You will have to follow through with the purchase if your bid wins. Otherwise, you’ll forfeit the deposit and be liable for sheriff’s fees.
  • It will be your job to evict any tenants that still occupy the property.

The Conditions of Sale

You’ll have access to the Conditions of Sale will include information on the costs, including the sheriff’s fee and auctioneer’s fee. These can change at any time before the auction so be sure to keep up to date.

If you arrive before the auction starts, you’ll be present when the auctioneer reads out the terms and conditions of the sale.

How do I find a property auction?

Resources for finding auctions include websites such as newspapers, real estate agents and websites of property groups. You could also browse the websites of various auction houses to see what’s in the pipeline.

Doing research

An estate agent can be a pivotal source of information. For example, they can advise you on the going rates for properties located in the area where the auctioned property is situated. This gives you an idea of what you should be prepared to bid.

Potential delays to the transfer process

  • Sometimes the property purchase process can get caught up in a tangle of legislation.
  • For example, if the owner is being sequestrated, they will be allowed to occupy the property while this is occurring, holding up the purchase.
  • Property in Possession (PIP) is held by the bank while they negotiate administrative fees and legislation. So PIP may not be good buys.

Know what you can afford

You need to go into an auction with an idea of what you’re willing to bid. Getting prequalified can help by determining what you can afford on a home loan. You can get prequalified by contacting an expert at ooba Home Loans or by using our free, online prequalification tool, the Bond Indicator.

Get prequalified for a home loan today

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