Diving into the world of auctions can be tricky without prior knowledge and understanding of the accompanying vocabulary. The auction environment can be both thrilling and intense, but knowledge is power, and understanding relevant auction terms before heading to your first auction can help ease first-time nerves.
Whether you’re a newcomer to the auction scene or an experienced buyer looking to brush up on relevant terms, here are ten auction phrases you need to know:
Auctioneer
A qualified person who manages the auction by accepting bids and declaring goods sold. To become a full-fledged auctioneer, an individual must complete intensive in-service training as an auction clerk or general assistant at an accredited auction company/house. To complete this training can take up to four or five years.
Absentee bid
If you cannot attend the auction, an absentee bid is an alternative way to bid without attending the auction. Also known as a proxy bid, it is where the auctioneer or a representative bids on your behalf as if you were there. It is subject to the guidelines and rules of the auctioneer or auction house.
Bidders pack
A bidders pack contains all the documents and information that an auctioneer provides to potential buyers for a specific auction. It includes details about the auctioned item(s) or property, such as specifications, terms and conditions, legal documents, inspection reports, and any other relevant information that buyers need to review before participating in the auction.
Terms & Conditions
The Terms and Conditions are the rules, specifications and requirements of bidding at a specific auction. It is provided before the event and will contain everything from what form of payment is accepted to whether items are sold Voetstoots (as-is).
Registration requirements
In order to participate in the auction, the bidder is required to pay a refundable deposit and send through relevant FICA documentation. The deposit is refunded if the bidder has not made a purchase, or it is deducted from the final sale.
FICA (Financial Intelligence Centre Act) is a set of regulations in South Africa that is intended to prevent financial crimes such as money laundering. In order to be FICA compliant, you need to present the following documents:
- ID document or passport
- Proof of residential address (no older than three months)
Reserve price
Reserve Price is the minimum threshold price that the seller will accept for an item. This is a predetermined price but can be amended at any time prior to the auction taking place. However, this needs to be stipulated in writing and should be communicated before the auction takes place.
Vendor bids
A process that allows the auctioneer to enter bids at an auction on behalf of the seller. This is done in order to ensure a fair market-related sale is achieved. While the aim is to increase prices, their use can be considered unethical and may be regulated by auction laws to maintain fairness and transparency. In South Africa, in order for vendor bidding to be legal, it must be announced at the start of the auction.
Section 45 of the Consumer Protection Act, Act 68 of 2008 states that, “unless notice is given that a sale by auction is subject to a right to bid by, or on behalf of, the owner or auctioneer: (a) the owner or auctioneer must not bid or employ any person to bid at the sale; (b) the auctioneer must not knowingly accept any bid from any such person, and; (c) the consumer may approach a court to declare the transaction fraudulent if this undertaking has been violated.” It is imperative that prospective buyers know their rights, ask questions and review the rules and guidelines before the auction takes place.
Bid Increments
A Bid Increment is the amount a bid increases by. The auctioneer will set the increment, which will increase accordingly after each new bid is made. However, online increments are usually predetermined.
Hammer price
The “fall of the hammer” price is the final sale price at auction. No bids are accepted after the hammer has fallen, and the highest bidder is legally required to pay for the goods. Winning an auction creates a binding contract, and failing to pay can result in a breach of contract. Depending on the auction type and terms, you might lose any deposit you've paid, face legal action to recover the owed funds and damage your reputation as a buyer.
Voetstoots
The Voetstoots Clause refers to buying something “as-is.” This clause acknowledges that products are purchased without guarantee or warranty and at the buyer’s own risk. This clause stipulates that it is the buyer's sole responsibility to examine and judge the goods for themselves before participating in the auction.
When it comes to purchasing real estate, the Property Practitioners Regulatory Authority (PPRA) states buyers should practice caution. Prospective buyers are often unaware that when they sign the “Offer to Purchase” agreement, it includes the Voetstoots clause, and is designed to protect the real estate agent in regards to the Consumer Protection Act. As such, buyers are always advised to conduct a home inspection when possible in order to avoid unnecessary headaches.
Now that you have learned the key phrases you’ll likely hear during your auction journey, it’s time to find your next auction. Auction Calendar makes finding your next auctions as easy as Once, Twice, SOLD!
