Residential Property Auction

If you open a newspaper or drive through your neighbourhood on a weekend, you'll most probably come across residential property up for auction. This article takes a look at the rather new trend of residential property auctions in South Africa.

Residential Property Auctions In South Africa

Luxury yachts, rare artworks and antiques are traditionally the kind of fare that gets auctioned at prestigeous auctions and auction houses such as the famous Christies or Sothaby's.

In South Africa, though, auctions have historically been associated with insolvent or deceased estates and all the heartacke, hardship and feelings of embarrassment and possible stigma attached to such regrettable events. South Africans have, for a very long time, also held the opinion that auction properties are sold at bargain prices. But recent trends in residential property auctions have proved these preconceptions wrong!

Residential property has always been auctioned in South Africa, so its not a new concept. But those residential properties that were auctioned were usually limited to houses that had been repossessed by banks and often snapped up by speculative buyers or shrewd investors. Until fairly recently, the majority of residential properties that came to auction were those that were difficult to sell through the traditional use of estate agents, but now it has become a popular option for ordinary residential property sales in South Africa.

In Australia, over 85 percent of real estate is reportedly sold by auction. When Australia experienced their property boom, auction sales became more populat than the traditional private treaty sales method for residential property in that country.

Could South Africa be heading down the same path? Property auctions in South Africa may become very popular if the demand for South African property stays as strong as it has been in recent years.

Residential property auctions have gone through a strong growth period in recent years. According to the South African auction industry, the number of residential property auctions have increased by more than 300 percent over the last few years. Auction attendance has reportedly also increased by over 200 percent over the same period.

Resedential property auctions may continue to gain momentum in the future. Even when the property market turns (and it will turn sooner or later) auctions may become a preferred method of disposing of residential properties quickly.

When Is Auction The Best Option For Sellers?

From a seller's point of view, residential property auctions work best when there is a high demand for real estate in an area. The law of supply and demand dictates that competitive bidding will push prices up.

The atmosphere and a sense of competition which an auction creates is one of the best ways to find a good selling price. A resedential property auction is also a great way of finding the true market value of a property, especially when it is unique, unusual, a landmark in some way or another, or difficult to value for any other reason.

Because it is quick and accurate, it's also a good choice for sellers who need to sell urgently. Sellers who have been transferred elsewhere on short notice, sellers in financial difficulty, and sellers who are emigrating may achieve a quick sale at the true market value for their property..

Through a residential property auction, all the buyers are gathered in one spot. Because bidders have to be able to pay the purchase price upfront, or have their finances pre-arranged, there are no suspensive conditions and other complications. This means that, when the hammer falls, the seller sells and get the money relatively quickly.

Why Would Someone Buy At Auction?

From a buyer's point of view, auctions also have their advantages.

The advantage an auction holds for buyers is that they know exactly who is bidding against them and exactly what the competition is offering. The auction process is transparent. There is no room for "bull-$#!#". No-one can tell a buyer that there is a higher offer than his, if it is not true.

Sellers at auctions are usually highly motivated. Auction sellers are not merely testing the market - They want to sell.

Auction buyers know exactly how much you can afford before making their offer to purchase, because buyers have to have their finances arranged before the auction day.

There must be some negatives - What Are They?

The auction method of selling real estate limits potential buyers to those buyers who can be on the spot at the time of the auction, cash buyers and buyers who were able to get their financing pre-arranged.

This disadvantage can be eliminated by including a period after an auction where the seller's reserve price havn't been met, for buyers that were not able to get in a cash position before the auction to make their offers.

Other estate agencies will not be able to intoduce buyers to the property, unless the auction allows broker participation.

Proper auction marketing can also overcome this apparent restrictive aspect. If the marketing is done right, everyone looking to buy in that area will have heard of the auction. Homebuyers are looking for a house. If your house is the right one for them, they will bid at the auction. Buyers chase houses, not real estate agents!