In a previous article we discussed the value of selling properties at auction, and the various benefits to a seller.
However, auctions are a popular tool for buyers – especially for those interested in buying for investment purposes. Investors and private sellers alike can benefit from the insight of a professional property valuator. But there are additional elements that you should get involved with before the auction process begins.
How can you prepare for a property auction?
Inspect
All properties sold at auction are sold “voetstoets” – as is. This means that you have no recourse if you discover a costly problem after the sale. A thorough inspection of the property will give you a good starting point for your bid, as you will be fully aware of the additional work that may be needed in order for it to be rented out, or sold on.
Do your homework
The location of a property is almost as important as the property itself. Familiarise yourself with the area and make it your business to know what developments are in the pipeline, what surrounds the property, what amenities are available, and what comparative properties are selling for. The auctioneer should be able to provide you with the plans, the zoning certificate, and copies of the title deeds and site diagram if necessary.
Understand the conditions of sale
A property auction is quite different to a normal transaction, and it’s vital to understand the conditions of sale for each property you plan to bid on. For example, a property may come with outstanding municipal bills or a tenant with a current lease in place. At the fall of the hammer, your transaction is legally binding and therefore you need to be thoroughly familiar with exactly what it is that you are buying.
Arrange your finance
Auctions sales are ‘non-suspensive’ sales, which means that you must have your finance approved prior to bidding. On a successful bid, the deposit and the auctioneer’s commission is payable immediately, and a guarantee for the balance is given within a prescribed time frame. It’s a good idea to chat to your financial advisor as to what course to take when seeking finance on an auctioned property.
While this is not an exhaustive list of the planning that is involved prior to buying a property at auction, it will give you a good idea of what is entailed.
All property investors will need professional advice at times, and we at The Property Partnership are ready to answer questions on valuations. Visit our website at www.property-valuation.co.za