Most of us have heard some fantastic stories of how someone managed to buy a home for a fraction of its real worth at a sheriff’s auction. This isn’t surprising given that everyone likes a bargain and let’s face it, buying something for hundreds of thousands of rands less than it would usually sell for is going to get more than a few tongues wagging.
People from all walks of life have bought homes via sheriff’s auctions. First-time buyers, shrewd investors and those who want to enter the buy-to-let market have all reaped the benefits of buying a home that has gone under the hammer and although this is an excellent way of finding a bargain, buyers do need to understand the rules of the game before they start bidding.
- Be Well Informed: Find out how much is owed on the property before you attend the auction. Banks generally have officials who attend auctions and who will not allow the property to be sold for less than is owed in bond arrears. You may have to pay a small fee in order to lay your hands on the relevant information, but this knowledge could prove to be invaluable when it comes time to bid. The most comprehensive online resource for sheriff auction information is www.sheriffhq.co.za.
- Know What is Outstanding: The price obtained on auction may be the selling price, but in general this is not all that will have to be paid. The outstanding rates and taxes on a property have to be settled in full before transfer can take place. For this reason it is highly advisable for potential bidders to contact the local municipality to find out how much is owed and this should then be taken into consideration when making a bid. The same applies to outstanding money owed to body corporates or homeowner’s associations. The details of such can usually be supplied by the attorney who is handling the auction sale.
- Don’t Buy Blind: It is not always possible to carefully inspect a property that is going up on sheriff auction. The voetstoots clause will apply and the property is sold ‘as is’ with no guarantees. In other words, the buyer will be responsible for any major repairs to the home, including structural damage.
- Find Out Who Lives There: Enquire if there are tenants with a lease in the home and if so how long the lease still has to run. It’s important to note that tenants have rights and as such cannot be evicted purely because the property has been sold. Be warned the previous owners may be reluctant to vacate the property and may have to be evicted once transfer has taken place.
- Check Your Financials: Bidders should ensure that they have the correct financials, including the auctioneer’s commission, in place before bidding on a property. While banks are generally more than willing to grant a bond for the purchase of a home bought at sheriff auction, it is highly advisable to approach the bank beforehand in order to ascertain how much it will be willing to advance. Remember that although a bank may grant a bond in principle, this amount could change once it has formally valued the home. With this in mind, it may be an idea to approach the bank which currently holds the bond on the property. Not only does it know the true value of the home, it has a vested interest in finding a suitable buyer for the property.
- Don’t Get Carried Away: Bidders should always set a limit on what they can afford and never go beyond that amount. Humans are competitive by nature and it is easy to get carried away and bid more than one can afford for a property that one is determined to own.
- Familiarise Yourself With The Rules: Bidders should always get a copy of the terms and conditions of the auction before the time in order to become familiar with the auction rules. Find out in advance what sort of deposit has to be paid and the timeframe in which the bidder will have to pay this. Likewise, find out how much time the auctioneer will grant before the full purchase price is due.
- Attend At Least Three Auctions Before You Buy: This applies to those who are new to the auction game and who have little understanding of how the auction process works.