Many investors and home buyers are making use of auctions as a way of discovering the next great bargain. Bidders will find everything from entry level homes to vacant land and multi-million rand mansions available on auction. But, before you rush to start waving your bidding paddle in the air make sure to do your homework before buying a property on auction – be it at a physical auction or an online auction – as there are certain things any bidder should be aware of.
A helpful place to start is at an actual auction. Attend a few auctions and just observe and take notes of the process. It will also be helpful to have a look at upcoming auctions and decide whether you might be interested in any of the properties that are available. Then, once you have found properties that are appealing to you, ensure that you gain as much insight and information on these properties as possible. Find out about zoning, rates and taxes, and levies. When you are satisfied with this information, arrange to visit and view the property. This can be considered an essential part of the bidding process, as prospective bidders who have gained access to the property may find it easier to obtain financing than those who did not view the property. Once you have done this and decided to proceed make sure that your finances are in order. It is wise to decide on a maximum amount you would be willing to pay for a property and make sure that those funds – in whatever form - are readily available should you win the auction. At live auctions the auctioneer and seller may very well demand compensation should a deal fail because of your financing being unavailable.
Do also keep in mind that almost all auctioned properties are sold ‘voetstoots’ or ‘as is’, which means that any damages on the property are not the seller’s responsibility to fix, unless specifically defined in the contract or Conditions of Sale. This is another reason why viewing the property and getting as much information as possible is vital. The problem may be a simple one of a broken door handle or there may be cracks in the foundation – so make sure you are aware of any problems and consider the costs involved in any repairs that may be needed.
It is essential that all your personal documentation is in order. Should you attend and bid at a live auction you will have to provide positive identification in the form of a bar-coded ID book as well as proof of residence (this is according to the regulations set out by FICA). When bidding online it is necessary to make sure your registration is complete and accurate before the auction begins.
When bidding at an auction, it is essential that you stay focused, rational and unemotional about the property in question. Most people form an emotional attachment to a house before they have even started bidding on it, and as such they can end up over-bidding well beyond their means in the heightened adrenaline-rush of the auction environment.
The fact of the matter is that you can find great bargains by buying real estate on auction. As long as you do your homework, organise your financing and information efficiently and keep a cool perspective when bidding, it is likely that you will enjoy the experience and more likely than not find a great deal.