Tips for DIY home auctions
- Most residential streets these days are dotted with For Sale signs. Many
of these signs remain for months, sometimes years. Few options for offloading
properties are available to private owners who want to do so quickly; it's
an estate agent, an auction house or self-advertising. In most cases the
process takes a lot of time.
There is another course, one that most private homeowners have shied away from in the past, and that is auctioning your property yourself. Auctioning through an auctioneering house is problematic for property owners who are cash-strapped and wanting to sell in a hurry. Most auction houses charge an upfront non-refundable fee, regardless of whether the property is sold or not. This is to cover advertising and other costs. Property owners with cash-flow problems are reluctant to commit to these fees if the sale can't be guaranteed and therefore shy away from this option.
Realestateweb has been investigating DIY property auctions and according to the only website (we know of) that currently offers this service to private property owners, it is becoming more and more popular. Bid or Buy charges property owners a once off listing fee of R100 to list their property for auction. If the property is sold, there are no further commissions.
Private Property also offers private auctions through the Bid or Buy site, but charge an upfront fee of R6 000 to administer the process and take photographs and video of the property.
Bid or Buy CEO Jaco Jonker says they have been offering the cheaper service to private homeowners for some time, but people are reluctant to use this option. He suspects it is because people are unfamiliar with the mechanics of the site. Bid or Buy however has a dedicated team that will walk you through the process before you take the leap.
According to Jonker, it's quite simple. There are three available options. A standard classified or "Buy Now" listing, which is a normal static advertisement. Then there are the auction options. Firstly, and this one is not recommended, there is the no reserve auction, where bidding starts at R1 and progresses from there. For homeowners Jonker recommends the set starting price or reserve price auctions. With a set starting price auction a minimum amount is set and only bids higher than the set price can be entered. The most successful auctions are reserve price auctions. Here bidding starts at a price below the reserve and if it closes without the reserve being met, the homeowner can close the bidding process as unsuccessful. Being flexible on a starting price, or setting a starting price below the reserve, usually generates more interest in the property.
Bidding takes place over a period of three weeks and closes on a date determined by the owner, and no shill bidding is allowed. Jonker says not only is the practice unethical, it is illegal and any property owner who is suspected of shill bidding will be banned from the auction site for life.
The practice of shill bidding is when the seller of a product arranges with others to bid up the price if they are not satisfied with the offers.
Bidders have to agree with the Bid or Buy terms and conditions which enter them into a binding contract once a bid is made and there are fail safes in the system that prevent a property from being sold for less than the owner expected. It is important though to make absolutely sure that you know how the online system works if you are going to put your property up for auction. The site can't be held responsible for faulty listings with the wrong price.
Once the bid is complete and an offer accepted, the owner would hand the transaction over to a pre-appointed attorney, of the owner's choice. The system also allows the uploading of several photographs and a detailed description of the property, so owners can be creative about their listing.
We asked Reyda Kloppers, owner of AG Smuts & Kloppers attorneys if there are any legal pitfalls with a private property auction such as this. "Homeowners would have to ensure that prospective bidders are aware that they would have to sign a standard purchase agreement on conclusion of the bidding. It is also important for property owners to state that the transaction is subject to bank approval. All property transactions are subject to bank approval, as this guards against the property being sold for too little."
Kloppers also advised property owners to carefully select their transfer attorneys prior to listing their properties for auction. She says the best place to shop for a transfer attorney is at the various banks. Banks would refer clients to firms which have representatives on the banks' top panels. According to Kloppers, this is the most cost effective and speedy way to go. "When one uses an attorney that doesn't serve on these panels there are often extra delays due to the attorney having to outsource a lot of the work. This can have extra cost implications as well."
Article by: Leoni Kok - www.realestateweb.co.za