Part 1 – What you should know about auctions
Auctions are one of the oldest forms of trade. Yet the public is still ill informed and unsure about this age-old form of trade.
Pieter Geldenhuys, CEO of national auctioneering group Bidders Choice, explains what makes auctions such a great platform for buying and selling assets.
Q: Who is the typical auction seller?
PG: The source of assets sold on auction begins and ends with a seller. There are different types of sellers.
- Private sellers want to sell their properties as a result of their own need to exchange their assets for money. These sellers mainly choose to sell their assets through auctions as it is a result driven, transparent process that gives a clear message to the market that this is a serious sale.Various circumstances lead the sellers to the decision to sell their assets. For example, an individual is immigrating, requiring an urgent sell of assets and fixed property. Another example would be that seller seeks an alternative sales platform because the assets have not been selling on the open market.
- Deceased estate sellers: Executors and administrators of deceased estates prefer to sell assets on auction because an auction is a transparent and effective way to dispose of estate assets. The sooner they can dispose of the assets and wind up the estate, the better for everybody involved, including creditors and heirs of an estate. They also know that deceased estate auctions always attract a lot of interest as buyers know that this is a “must sell” scenario, and possibilities exist for buyers to find bargains that one can expect at an auction.
- Salvage auctions: These auctions normally take place when vehicles, such as earth moving machinery, used trucks and other vehicles, have been in an accident, stolen or weather-damaged, and repairs will cost more than the vehicle is worth. In such a case, the insurance company will take possession of such an asset and then sell the machinery, used trucks or other vehicles through auction to salvage yards or rebuilders. Dealers in Earth moving machinery and used trucks are very often buyers and sellers on auctions. They are familiar with the process and understand the competitiveness that drives prices up on auction. They also know that the auction process is quick and very effective.
- Liquidation auctions: A liquidation auction is technically where assets are sold by sellers to raise funds for their creditors, either voluntary or involuntary as a result of bankruptcy or legal judgment. As with all auctions, bidders have the opportunity to snap up quality items at discounted prices.
Buyers must remember that goods are sold as they are and cannot be returned, as the auction service does not assume any liability for any product defects. Buyers should thus bid carefully and inspect items closely if possible.
Sellers of assets and property must also understand that not every property or all assets are necessarily good auction material. A seller must consult with an auctioneer first before the auction and gain expert advice from the auctioneer in terms of the “auction-ability” of an asset, being it fixed property or movable assets. A credible auctioneer will always be able to give a seller advice of the advantages of an auction and accordingly inform the seller if his or her asset will be good auction stock.
Q: How do I find out about an auction?
PG: You can find out about an auction through various media channels, including: printed media; websites; social media; direct database mailing (to opt-in interested buyers databases); auction street pole posters and billboards; auction flyers; and in some instances even radio and TV advertising.
The public is welcome to visit the auctioneer’s website or contact the auction house, which normally allocates a project manager for each auction or auction event.
Interested buyers can obtain information about viewing dates to view assets before the auction, either from the allocated project manager or on the website itself. In many instances, specific dates and times are allocated for the viewing, or else the interested buyer can make an arrangement with the project manager to view the property or asset.
Read more in our three-part series of what you should know about auctions.