Auction Proceedings Are Legally Binding

Auction Proceedings Are Legally Binding

Private Property South Africa
Anna-Marie Smith

Scrupulous or not, the code of conduct of auctioneers is what determines the precedings to an auction, how the proceedings during the auction are conducted, and most of all the proceeds derived from the sale. However, all such proceedings, be it prior, during or after the fall of the hammer, are backed by the law.

What sets the overall tone of an auction is the relationship between seller and auctioneer, since they share one common goal, which is to attract the highest possible bid. As property professionals, auctioneers, for all intends and purposes act in the same capacity as estate agents, who are required to be registered with the Estate Agents Affairs Board (EAAB) and in possession of valid Fidelity Fund Certificates. In addition, they have to be registered with the SA Institute of Auctioneering (SAIA) which serves to investigate members not acting in compliance with the prescribed code of conduct. SAICA’s code of conduct states that: ”Auctioneers are to fulfill duties to the best of their knowledge and belief, and with the exercise of reasonable care and without negligence, to protect users against fraud; misrepresentations; unethical practices in connection with the sale, disposal or liquidation of any movable or immovable property.”

Seller and auctioneer have to reach agreement on a number of issues, including the exact conditions of the sale, such as setting the reserve price, usually determined by the market value. Although history has it that reserve auctions originated from combating organized, low value bidding, this method protects sellers from settling below their minimum price. Auction sales are concluded when hammers fall on the highest bid of a registered bidder, that has to be in excess of the reserve price. However, auctioneers reserve the right to present the seller with a higher bid received after the hammer has fallen during an auction. And this is where transparent auction proceedings become a highlighted factor.

All auction bidders have to be registered on the bidders role, in specific capacities, such as absentee bidders, or present as vendor or proxy bidders. This is a transparent procedure for the knowledge of all bidders, that serves to eliminate the possibility of bidders bidding against only themselves. A proxy bidder uses a third party to act on his behalf during the auction, who can be another bidder or an employee of the auction house. And a vendor bidder is used to break the ice at an auction by introducing a starting price, and has to be either announced by the auctioneer or be agreed upon prior to the auction.

In addition to registering prior to the proceedings, bidders are wise to inspect properties and related documentation, as well as understanding the terms of the specific auction. Registered bidders are also required to have in place the necessary financial guarantees such as deposits and mortgages, traditionally backed by banking institutions.

When in doubt, bidders should consult legal practitioners such as conveyancing attorneys who specialise in auctioned properties.


Found this content useful?

Get the best of Private Property's latest news and advice delivered straight to your inbox each week

Related Articles

Add value to your home with the right choice of fireplace
Latest trends in fireplaces that will warm your home and add value to your property.
Tips for heating your home and saving money
Saving electricity makes excellent financial sense, and with winter coming up it pays to look at ways of warming your home that will save money in the process.
Safety and security tips for agents
Estate agents need to be alert and aware of the risks involved in showing properties and meeting new clients.
Gas installations – what homeowners need to know
All gas installations need certificates of compliance issued by certified installers.