Tips for Buying Property On Auction
With the economy in slow-mode, the number of property auctions is expected to increase - along with the number of prospective buyers looking for “bargain” homes at prices below market value.
Davel says the first thing that buyers who are considering an auction property should do is seek the advice of an experienced estate agent that is familiar with the area and able to provide a comprehensive market analysis (CMA).
However, Jan Davel, MD of the RealNet estate agency group, says buying a house or flat on auction can be a risk for inexperienced home buyers.
“If they do not know much about the area in which the property is situated, for example, or about current market trends in this area, they run the risk of overpaying,” he says.
“So the first thing that buyers who are considering an auction property should do is seek the advice of an experienced estate agent that is familiar with the area and able to provide a comprehensive market analysis (CMA).”
Davel says this will include details of recent sales of similar properties in the area such as the asking prices, how long the properties were on the market and the actual selling prices of those which sold fastest.
“The agent will also be able to tell them about the area in general and whether home values are trending up or down, which they will also need to know in order to work out what a fair bid for the auction property would be.”
Secondly, he says the prospective buyers should make a point of viewing the property before the auction, and carefully checking its condition.
“They need to bear in mind that if the owner is being forced to sell because of financial difficulties, or if the property has already been repossessed by a bank, it is quite likely that general maintenance has been neglected for some time,” says Davel.
“And if that is the case, they will need to seek qualified help to estimate the cost of any repairs that are necessary and take this into account when they work out the maximum they are willing to bid at auction.”
Thirdly, Davel says they should carefully check the conditions of sale and make sure that these do not state that they, as the buyers, will be responsible for any levy in arrears or outstanding rates and municipal charges that apply to the property, which could amount to many thousands of rands.
“The property should be ‘free and clear’ of any such debts, and should also have all the compliance documentation required for electrical and other installations,” he says.
“And while checking the sale conditions, they should also make sure that the auction price does not carry any form of interest between the date of purchase and the registration of transfer.”
Then finally, Davel says prospective buyers must be sure their financing is in order before the auction takes place, because they will usually need to pay a 10% deposit “on the fall of the hammer” and provide guarantees for the balance of the purchase within 30 days.