Property auctions and repossessions

Private Property South Africa
Gavel and Company

In SA, you can sell your house in one of four ways – through an estate agent, by doing it yourself (if you feel like hassling with paperwork and legalities), through a website like Private Property (a really smart option that not only puts you in touch with properties throughout the country, but also lets you browse around at your own pace), or by working with a reputable auctioneer.

A major advantage of a property auction is that you can choose the date on which to dispose of your property. An auction provides an extra avenue for selling and it is a growing trend worldwide and, in SA, many estate agencies have started their own auction divisions. Agents now realise that auctioning is a fast and efficient way of selling property.

Another advantage is that no-one is excluded from the selling process. Indeed, some auctioneers mandate local estate agents to help sell the property in exchange for a share of the commission, a process that increases the chance of a successful sale.

An auction creates hype and excitement and a good auctioneer can often push the bidding beyond the reserve price. With reserve auctions (ie: the seller sets a minimum price), the bidding can remain open for three weeks after the auction and this is when much of the real activity starts. Unlike a sale through an agent, most auction deals are settled in cash. In the presently depressed property market, a correctly priced property should sell during the auction mandate period.

When a bid is made, the auctioneer requires a deposit to show the purchaser’s bona fides. Obviously, a bidder must be 100 percent sure that his finance is in place before the auction: unlike a sale through an agent, no auction sale is conditional on the buyer obtaining finance.

There are some disadvantages to auctions. Some auctioneers ask for the costs of advertising to be paid upfront and if the property doesn’t sell, you’ll lose your money. Other auctioneers pay for the advertising, thereby sharing the risk, a fact that makes the auctioneer keener to make a sale.

There is a perception that auctions are for bargain hunters, which is not really the case. Houses generally sell for a market-related price – at auction or by any other way. Also, some sellers worry about the “stigma” attached to an auction, which is often seen as a sign someone is in financial trouble.

Conversely, many sellers chose the auction route as they are looking for a speedy sale and the knowledge that the sale will in all likelihood be final. Auctions also eliminate the frustrations of long sole mandates or Sunday show days when the family has to vacate the premises.

Another form of property auction involves the forced sale of a repossessed home – one taken back by the bank from a defaulting owner. Banks try to be accommodating and will often agree to increase the bond repayment period, but the sad truth is that it is virtually impossible for a normal salaried person to catch up one or two months’ arrears.

If a debtor remains in breach, a summons is issued, followed by a court judgment. If there is still no payment, a warrant in execution (writ) is issued, entitling the bank to take legal action to recover the debt. A date is set for the property to be sold as a sale in execution (SIE), but the debtor can still save the situation if he comes up with the money: if this doesn’t happen, the debtor has no say in the final selling price.

The bank has the option to accept or reject any offer. If the property is auctioned by the Sheriff of the Court, and the bank is not satisfied with the price, the bank will buy back the property. This is when it becomes a property in possession (PIP). The bank now has to take transfer and try to sell the home through the usual channels.

By selling a property privately before the SIE, a debtor can usually negotiate suitable repayments and banks will often offer a discount on the outstanding amount. Most banks prefer not to buy back the property and they, too, would rather dispose of the property prior to the SIE. At the moment, up to 800 properties are being sold-in execution in South Africa every month – a sobering statistic.

Written with the assistance of Peter Harris, CEO, Gavel & Co Property Auctions +27 32 946 3434

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Auctions Repossessions

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