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Sales in execution: Go in with your eyes wide open

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A prospective buyer of a home on auction generally has six weeks from the time that the property has been advertised by a sheriff until the auction sale date.http://hometimes.co.za/advertise-with-hometimes/

Unlike auctions involving liquidation sales and insolvent estates, where an auction house will have a show day “if it’s a good property”, or viewing allowed three hours before the auction, accessing properties being sold in execution can present difficulties. According to deputy sheriff Nick Boshoff of Sandton South, while prospective buyers can go and view the property after it has been advertised, not all defendants, and these could mean they have tenants, will allow them inside. What the sheriff’s office does do is advertise pictures of the property.

Stressing how important it is to do one’s homework before the auction, Dr Simphiwe Madikizela, head of projects at FNB Housing Finance, warns that these properties need thorough inspection and a good understanding of the risks and costs prior to bidding, as well as the responsibilities when a bid is accepted.

“Properties sold on auction have ended up there for various reasons. Either the customer has defaulted, or it is a deceased estate, where the surviving relatives were unable to take over the bond, or the customer is sequestrated, which is court ordered,” explains Madikizela.

The sale is conducted through a sheriff of the court at a public sale in execution. The sheriff is appointed by the courts to act within specific areas or regions and is considered an unbiased party between the execution debtor and successful bidder, she adds.

“There are various auctions throughout South Africa, and to find out where an auction is next taking place properties are advertised in the Government Gazette as well as at least one local newspaper in the area,” says Madikizela. “A potential purchaser needs to do all the research he or she would normally do when buying a house through an agent, including a detailed inspection, an understanding of the market value and any renovations or repairs that would be required.”

The auction

auction 2 resizeHaving viewed the property, the potential purchaser will need to register as a bidder. The sheriff will start the process by accepting the registered bidders and going through the conditions of the sale. He will start at a specific price and all registered bidders are free to start bidding.

“The purchaser needs to be aware that there are a number of costs involved with buying at an auction,” says Madikizela.

These include a non-refundable deposit of 10% of the purchase price. Then there is value added tax (VAT) and the sheriff’s commission of 6% on the first R30,000, and 3,5% on the balance of the price up to a maximum of R7,000. All these costs are due on acceptance of the bid.

“Once your bid has been accepted you will be expected to accept and sign the conditions of sale and pay the deposit, as per the different banks’ requirements,” says Madikizela.

It is a common misconception that banks don’t finance properties on auction. The process is the same for any other property. However, if a purchaser bids on the property, pays the deposit and the sheriff’s commission, and if the bank financing doesn’t go through, then the bidder will lose that initial outlay.

A few more potential risks

auction 3 resizeIt is the purchaser’s responsibility to know the condition of the property before he or she bids on the sale. Properties at sales in execution are generally sold “voetstoots” – a South African term which means “as is”.

“This is a very important aspect to take into account because there is no recourse if you are unhappy with the state of the property once you have made the purchase,” says Madikizela.

The second risk is that if the property is on auction because the client defaulted, it is very likely they were unable to pay their rates and taxes.

“Because you have bought the property voestoots this means that you are liable for the outstanding rates and taxes on the property, which may result in a fairly hefty bill,” warns Madikizela.

Other responsibilities for the purchaser include the payment and obtainment of an electrical compliance certificate. The law requires a homeowner to be in possession of a compliance certificate before taking ownership. In a usual sale it would be the seller’s responsibility, however in the case of an auction it is the purchaser’s responsibility.

“A major consideration when buying a house on auction is if there are currently tenants,” says Madikizela. “In the event that the tenants do not vacate the property, the purchaser will have to follow a legal process (which can take up to three months) in order to evict non-paying tenants. The purchaser is liable for their eviction and the associated costs. ”


Alison Goldberg is the former property editor of Business Day (1985) and the Financial Mail (1991-99). In 1995 she won the Sanlam Financial Journalist of the Year Award. She has edited such titles as National Constructor and The Miner in Australia and has freelanced for The Star, The South African Jewish Report and The Jerusalem Post.

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