Auctions Part 2 – What you should know ?
Selling or buying assets on auctions can be overwhelming as it could be an unfamiliar platform of trade, even if it is one of the oldest.
Pieter Geldenhuys, CEO at national auctioneering house Bidders Choice, explains how the actual on-the-day auction process works.
Q: What should a first-time auction buyer know?
PG: If you have never taken part in auctions, make sure that you get an bidders (information) pack about the upcoming auction from the auctioneer. Study the pack and make notes so that you can ask the auctioneer questions before the auction starts.
Never bid on an auction if you are not 100% sure of the terms and conditions and what moneys are payable on the fall of the hammer and before transfer. Make sure that you familiarise yourself with the property and also what is expected from you as a buyer to perform according to the rules of auction.
Make sure what is required from you to enable yourself to register before the auction and to take part in the auction. If there is a lease on the property, get a copy of the lease agreements and acquaint yourself with the lease, as you are going to be the new landlord.
If you have studied the bidders pack before the auction, you will know the rules of the auction, any outstanding costs, as well as VAT and commissions payable. If it is not specified, then make sure you ask the auctioneer before the auction starts.Deposits payable
In most instances, especially with property auctions, a refundable registration deposit is required to be able to bid on the auction. The registration deposit amount will be advertised before the auction and is dependent on the value of the asset(s) on sale.
The buyer will be required to either pay the full amount of the asset on the fall of the hammer, or on a property or larger assets the buyer will be required to pay a deposit ranging from approximately 5 to10% deposit and in some instances even more, on the fall of the hammer.
Can I obtain finance to buy on auction?
Auction sales are non-suspensive, meaning that you cannot make your bid subject to getting bond finance. Auctioneers normally do not get involved in the arrangement of finance for fixed property, or assets such as vehicles. Auctioneers will be able to refer you to a bond originator or bank. Banks are not very keen to pre-finance anymore. However, if you do have a good relationship with your banker, you might be able to make a prior arrangement.
At certain types of auctions, such as vehicle auctions, bond originators offer their services during the viewing days and/ or on the day of the auction to offer pre-finance to interested buyers for vehicles.
Rules of the auction
It is important that all interested buyers and sellers familiarise themselves with the rules of auction and conditions of sale as it forms the basis of the transaction. The rules of auction for all auctions are the same and has been laid down by a task team appointed by the minister and the consumer commissioner. It cannot be changed and it should be standard with all auctioneers.
The rules of auction are obtainable from the auctioneer, its website or on the day of the auction.