Tips for buying auction property online
PUBLISHED 28 MAY 2019
Over the past several years South Africans have become comfortable with and accustomed to making purchases online. Which is why online auction property transactions make perfect sense.
It’s a whole lot easier and quicker than physically attending an auction and provides an opportunity to acquire property at a value-for-money, market-related price.
So says MC du Toit, CEO, Property Sales for BidX1 South Africa: “Now acquiring property for sale on auction via an online platform is rapidly becoming a convenient and secure way of transacting. It’s a whole lot easier and quicker than physically attending an auction at a specified location, plus it’s secure, and provides an opportunity to acquire a property at a value-for-money, market-related price.
In many instances there is no buyer’s commission, or there is a reduced commission from that which buyers are used to seeing at normal auction sales, he says. However, bidders are advised to check the details of the property to make sure what the commission and deposit structure is.
For those who have not previously participated in an online property auction, Du Toit highlights a few things you need to know. “Firstly, the auction takes place in real time, with the key benefit that you can bid for property from anywhere in the world and from any computer or handheld device.
“It’s also safe, as bidders have to register first and provide FICA documentation, namely ID and proof of residential address, as well as source of funds, thereby eliminating any fictitious bids being placed.
He says the process itself is transparent, as everyone can see the bidding as it unfolds, and as the process is also recorded, anyone is able to view the bidding for properties sold via our previous online auctions.
Du Toit advises as a first-step, if you are in the market to acquire property, that you familiarise yourself with the catalogue of properties on offer, and decide which property or properties are of interest.
“Before participating in an online auction, I strongly recommend that you physically inspect the property at one of our show days, download and fully understand the conditions of sale and read all the relevant information regarding the specific property of interest, all of which are available for each property on our website.
“Each property on auction has its own legal tab with access to all the information needed to make an informed decision, while in addition, we have professional property brokers on hand who can answer any questions via telephone or email. They can also take you through the bidding simulation and provide examples of what will happen when bidding commences. Furthermore, they can provide advice and assistance even during the auction.”
On the BidX1 online platform, an opening bid is declared for each property or lot, which is the price at which bidding will commence. In most cases this will also be the reserve price for the property, unless there is further creditor or liquidator’s approval required. This lets you know where you stand, because once the opening bid is met, the property is on the market and the highest bidder will be the successful purchaser.
Once you’ve made the decision to bid, you need to register – and generally this is with payment of a fixed registration fee. However, this may vary, should a liquidator or bank request a higher deposit, or even a lower deposit.
Bidder registration usually opens a week prior to the auction and while the registration process itself takes only about five minutes, it’s advisable not to leave registration to the last moment as you will need to have all the necessary documentation in place prior to the start of the auction. If you are the successful bidder, a deposit representing 10% of the opening bid amount for the property is immediately payable.
Unlike the private treaty process, all the auction properties are sold without any suspensive conditions, so if you are the successful bidder, a legal and binding contract has been formed and you are legally obliged to complete the sale.
“Consequently” says du Toit, “you need to ensure you have the necessary finance available for the purchase, either by pre-qualification through a bank or with ready funds on hand. The guarantees are generally due around 30 to 45 days from date of acceptance of your offer, which leaves you with reasonable time to apply for finance. However, the sale is not subject to the purchaser obtaining finance or bond approval.
“It’s also important to decide upfront how high you are prepared to bid in order to secure your desired property.
“If you don’t want to place your bids manually, you can set a maximum bid, which means the computer will then enter bids for you only as it becomes necessary to keep your position as the winning bidder and only up to the maximum bid price that you’ve specified. Your maximum bid cannot be viewed publicly, so only you know how high you’re willing to bid.
Du Toit advises bidders to do their homework upfront and know what they can afford and are willing to pay for a property, by virtue of the fact that sales are non-suspensive. “Misconceptions are that bidding aggressively will intimidate other bidders, or that dragging out an auction with low bids may cause other bidders to lose interest – neither of these is the case. Remain calm and do what you feel comfortable with.”
The bidding opens on all lots at the same time on the day of the auction, and the opening time is clearly advertised across all lots. The closing time for each lot is different and is also indicated on the relevant lot page.
If a bid is placed within 60 seconds of the lot’s closing time, an additional 60 seconds will be added. This is known as an extension period, during which any further bid that is placed will result in the clock resetting again for a further 60 seconds, giving all registered bidders a fair and equal opportunity to place another bid. This will continue until a full 60 seconds passes with no bids being placed.
Due to variations in browser and connection speeds, bidders are advised to make a bid with at least 10, 15 or more seconds remaining on the clock.
In the current buyers’ market, where stock is abundant but purchasers are in short supply, there is downward pressure on property prices, creating a situation which empowers buyers to negotiate strongly on price, adds du Toit.
“The auction method of sale is highly efficient in these market conditions, as it creates a platform where buyers can freely negotiate at that specific point in time, up to the level that they feel comfortable with, thereby creating a true and fair reflection of the market value of the particular property. The final price achieved may even exceed the seller’s expectation.
“Never before has the adage ‘the only reason a property doesn’t sell is because it is priced incorrectly’ been truer. A major advantage of the auction process is that it defines this ‘sweet spot’ through buyer demand on the day, thereby achieving a fair market-related price.”
Comments Dr Andrew Golding, chief executive of the Pam Golding Property group, which is in a JV with BidX1 South Africa: “There are many facets to property transacting, and this convenient, online property trading platform provides both sellers and buyers with another opportunity to sell or acquire property in a quick and highly effective manner on a specific set date, at a time when one is assured of an outcome. It’s yet another string to our bow in enabling us to offer clients a further option, in addition to our private treaty sales, which may suit their own particular requirements at a specific point in time.”
The next auction is scheduled for 3 July 2019, with the catalogue going live on 31 May. To receive the catalogue via email, interested buyers must register their details here.
For further information visit the website.