The Benefits Of Selling Or Buying A Property On Auction
Interested observers will have noticed an increasing number of On Auction signs lately among the For Sale signs on homes in Johannesburg's northern suburbs - and there's good reason for that, says Denese Zaslansky, CEO of the Johannesburg-based Firzt Realty group, which has its own auction division.
"There are more sellers than buyers in the market at the moment and stubborn inflation and high interest rates are still keeping a lid on demand, so sales by traditional means are slower than usual, but many owners are in a hurry to sell, and they are increasingly finding that the best way to get the fast results they want is to put their home on auction.
"As property professionals, we often come across owners who need to sell fast, to meet a deadline on relocating to take up a new job, for example, or because they need to liquidate funds for debt reduction or other investments, or because there has been a sudden change in their family circumstances. Others simply don't want to deal with lots of viewings by potential buyers. And our advice to such sellers is usually to put their home on auction."
Consequently, she says, real estate auctions are no longer automatically associated with home repossessions or seen as a desperate attempt to finally sell a dilapidated or derelict property that has proved unsaleable by other means and has been on the market far too long.
"One of the biggest advantages of sale by auction is that both sellers and buyers get an instant snapshot of the exact value that the market - represented by the bidders at the auction - currently puts on the property. However, if you're a property owner interested in selling on auction, it's vital to first consult a property professional who can help you to determine if this is the best approach in your specific situation."
Zaslansky says some other advantages of selling on auction include:
*Intensive marketing and short timeline: Auction properties often benefit from targeted and intensive marketing efforts designed to attract as many interested buyers as possible within a short timeframe and increase the chances of achieving a successful sale quickly.
*Serious buyers: Buyers attending auctions are usually serious cash investors, reducing the risk of deals falling through due to financing issues.
*Competitive bidding: Auctions create a sense of urgency and competition among buyers that can encourage them to offer more for the property than they might in a private sale.
*No negotiations: The auction process eliminates lengthy and potentially stressful price negotiations, as the highest bid at the auction is final. Auction sales are also unconditional, meaning they don't depend on the buyer being able to obtain finance, for example. Once the hammer falls, the sale is legally binding, as long as the reserve price (minimum net price set by the seller) is met.
*Lower holding costs: A quicker sale means the seller can avoid the ongoing costs associated with holding the property while it is transferred to the new owner, such as rates and taxes, insurance premiums and maintenance costs.
*Zero commission payable by sellers as this is paid over and above the bid price by buyers.
Meanwhile, for property buyers, she says, the additional advantages of purchasing on auction include:
*Motivated sellers: The owners of properties on auction usually want to sell quickly, which can lead to lower asking or reserve prices.
*Speed and efficiency: The auction process is typically faster than traditional home buying. Once the auction ends and the bid is accepted, the transaction moves ahead quickly to transfer of ownership. This eliminates the uncertainty of waiting for a seller to accept an offer and the potential stress of protracted price negotiations.
*Transparency: Auctions are transparent, with bids being visible to all participants, so buyers can clearly see what competition they have and make more informed decisions about the value of the property.
"However, it's also critical for potential buyers to conduct thorough research and due diligence before participating in a home auction, and to understand the risks involved so that they can be sure they are making a sound investment decision. Remember, unlike Sheriff's auctions of repossessed properties, our auction properties are sold with all compliance certificates in place, which adds to buyers' peace of mind."