When purchasing a property, whether it is to live in or for investment purposes, property buyers are always looking for the best way to purchase property at a bargain. One of the traditional ways of purchasing property for a bargain price has been through sheriff judicial auctions.
This usually means that the current owner of the property being auctioned is having financial problems and so buyers hope to be able to purchase the property at a reduced price. While this sounds like a good idea, if you do not have experience in purchasing property at a sheriff’s auction, it can become a nightmare. Here are a few things to consider before making the purchase of an auctioned property.
Getting the correct information
In order to find out which properties are currently on auction, in which province and in which area, you need to visit the following website www.sasheriff.co.za or you can go to the sheriff’s offices and request the list of properties to be auctioned. About two weeks before the auction is held, a list of properties to be auctioned, on a specific date and at a specific venue, is released on the website. In these two weeks prior to the auction it would be a good idea to make a list of the properties you are interested in and you must make it a priority to actually go and inspect these properties you are interested in.
Have cash in your pocket
When you are bidding at a sheriff’s auction you need to ensure that you have 10% of the purchase price readily available to transfer upon the conclusion of the sale. The purchaser will be liable for the auctioneer’s charges on the conclusion of the sale. The remainder of the purchase price must be paid by way of bank guarantees within 21 days of the date of the sale. It is too risky to rely on a bank to approve finance for the remainder of the purchase price as there is no guarantee that the bank’s evaluators will even be given access to the property you have just purchased. Basically this would be a cash sale and you must be prepared to finance the remainder of the purchase price yourself.
When doing your research in respect of the market-related costs of the property and what amounts you should be bidding at the auction, it is the purchaser’s responsibility to pay the outstanding levies if the property is in a sectional title or other medium density scheme and the outstanding rates. Only once these outstanding amounts are paid will the transferring attorneys affect transfer. It is important to remember that if a distressed property owner has not been paying his bond because of financial difficulties, which have ultimately culminated and have led to the property being auctioned then there is a big chance that he also has outstanding levies and rates. These costs must be included in the purchase price when considering what offer to make at the auction.
The last thing you want as a proud new owner of a home or investment property is a squatting owner or tenant refusing to move out of the property. Eviction orders are costly and lengthy processes that people do not give enough consideration to when purchasing a property at a sheriff’s auction. That is why it is imperative to gain access to the property prior to the auction and to make contact with the owner or tenant to discuss the possibility that you will be purchasing the property. Forming a relationship with the occupier of the property prior to purchasing could be the difference between negotiating a peaceful exit or rental amount, and a long, lengthy legal battle.
Going once, going twice, sold – to who?
As a purchaser it is important to know who is bidding against you and what price margins they are looking to make. Firstly, you have your investors who are generally at the same auctions week after week looking for a bargain. They will usually have a very similar price in mind as you which they will be willing to bid up to. Secondly, you have your home owners. A home owner will generally be someone who lives in the same complex or area as the auctioned property in question. They will generally bid higher than the investors. Lastly, you have the bank should the property be mortgaged. A bank will usually bid up until the reserve amount, which generally covers the majority of what the owner of the property owes the bank.
Therefore if you do your research properly and keep the above considerations in mind before purchasing that property to be auctioned by the sheriff then you will be a happy new owner of a property. It is also a good idea to consult an attorney or conveyancer who deals with the transfer of properties.