What to know about purchasing a property on auction
It is important to investigate what sort of sale is applicable. Is it a sale in execution, insolvency or property in possession?
How does an auction work?
On arrival at the auction one needs to register as a bidder, it is important to note that in order to do so you are required to provide FICA documents (identity document & proof of residence).
When registering as a buyer it is important to request a copy of the Conditions of Sale and ensure that you understand the contents thereof prior to making any bid. Buyers should take note of the following: zoning of the property, outstanding rates & taxes and amount outstanding in respect of levies to name a few.
Once the bid has been made and the offer accepted it is important to note that it is a binding contract and that no cooling-off periods or suspensive conditions apply. This does not mean that the buyer (purchaser) is not free to apply for bond finance, however, should such finance not be obtained the sale will still proceed and guarantees for the purchase price need to be presented.
Once you have made your bid as buyer you are required to pay a deposit as well as auctioneer’s commission on the same day.
When purchasing from an Insolvent Estate
The buyer becomes responsible for the property from the date of acceptance of the sale and is given occupation of the property.
The purchaser will become liable for rates, taxes and levies from the date of acceptance. The seller remains liable for the outstanding amounts prior to this date.
The purchaser may also be required to make payment of occupational rent on the outstanding balance on the purchase price from the date of acceptance of the sale until the purchase price has been paid or secured in full.
Consent to transfer may be required to be obtained from the Master of the High Court.
When purchasing from a sale in execution
The buys will need to make payment of a deposit (usually 10% of the purchase price) by way of cash, bank guaranteed cheque or an EFT in the sheriff’s office as well as payment of the commission.
The buyer will be responsible for payment of outstanding levies, water, electricity, rates and taxes from the date of purchase.
If the property is occupied the buyer will at his own cost obtain vacant possession (i.e. evicting the owner or tenant)
It is the buyer’s responsibility to obtain the electrical compliance certificate, at his own costs.
Property in possession
This is a sale by the institution which financed the property (i.e. the bank).
The bank will be responsible for payment of all levies, water, electricity, rates and taxes until date of transfer.
It is the buyer’s responsibility to obtain the electrical compliance certificate, at his own costs.
The buyer will need to make payment of the auctioneers commission and deposit on date of sale.
As buyer in addition to the above you will be responsible for all the normal costs of transfer payable to the transferring attorney together with transfer duty/VAT. Should a bond be registered the buyer is also responsible for bond registration costs.
It is imperative that the clauses of the contract are fully understood prior to signing.
Sascha Beck
Attorney, Conveyancer & Notary Public at Djv Inc
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