Exploring Different Property Auction Types

Auctions are quickly becoming a popular method of purchasing and selling property. This growing trend is driven by a tough economic climate, rising interest rates, and increased financial strain on homeowners, prompting more buyers and sellers to step onto the auction floor.

In a traditional market where finalising a sale can take months, these factors—combined with the speed and transparency of auctions—make them an appealing option for buyers seeking undervalued properties.

While property auctions can present great opportunities, they don’t always guarantee a bargain. Before committing to a purchase, buyers should understand how different auction formats work to avoid unexpected risks or costs.

To make informed decisions, it's crucial to explore the various property auction formats and how each operates. Each comes with its own rules, advantages, and potential challenges, all of which can significantly impact the buying experience.

Voluntary Auctions

A voluntary auction is where a seller puts the property on auction rather than going through traditional channels. This type of auction favours the seller, as they often have the power to set the reserve price and benefit from a quicker sale, avoiding prolonged negotiations. Competitive bidding is one of the main reasons sellers place properties in an open auction; this can drive up prices if multiple buyers are interested. Once the hammer falls and the reserve price is met, the sale is legally binding.

Why Choose a Voluntary Auction?

• Speed & Efficiency: A quicker alternative to private sales.
• Market Value Reflection: Competitive bidding can drive the price up.
• Certainty of Sale: No lengthy back-and-forth negotiations

Bank Auctions

This type of auction is organised by the bank when they are unable to recover the funds from the current bond holder. As a result, these properties are auctioned to recover the outstanding debt. Bank auctions can be great for buyers as properties are often listed at lower prices to attract buyers quicker and to recover the amount of debt. It’s important to note that properties are sold 'as-is,' with no repairs or guarantees from the bank. However, rates and taxes are typically the seller's responsibility.

Should You Buy a Property at a Bank Auction?

While this is an excellent opportunity for first-time buyers and investors, you will need to do thorough research regarding the property. Understand the risks - always check for outstanding debts, legal complications, and hidden costs before placing your bid.

Sheriff Auctions

A sheriff auction is a type of forced property auction where properties are sold to recover outstanding debt. This usually occurs when a bond holder is unable to continue with the monthly bond repayments and there’s no likelihood of funds being recovered. This occurs when the bank applies to the court to auction the property, which is one of the key differences between bank auctions and sheriff auctions.

A sheriff auction is ordered by the court and conducted by the sheriff to recover unpaid debts (municipal rates, defaults, etc.). While some banks may clear outstanding debts on the property, buyers can inherit outstanding rates, levies, and other debts attached to the property. Despite this, it's an auction that favours buyers as properties can sell at significantly reduced prices. I

s a Sheriff Auction Right for You?

As with bank auctions, sheriff auctions come with certain risks. Properties are sold as-is, so it’s crucial to do proper research, check legal documents, and be financially prepared for unexpected costs. If you’re new to property auctions, seeking legal advice before bidding is highly recommended.

Property in Possession Auctions

A Property in Possession auction refers to the sale of a property that has been repossessed by a bank after the previous owner defaulted on their home loan. Essentially, the bank buys the property back at a sale in execution (sheriff's auction) and incurs all the costs involved. At this type of auction, the bank has the right to bid on the property, just like any other buyer. If no other buyers meet the reserve price, or if the bank wants to protect its financial interests, it may buy the property back itself.

These auctions are not as common as bank and sheriff auctions, but are sometimes featured on the property market. When reselling it, the bank factors in all costs incurred, meaning the price may be higher than what was originally owed on the property.

Whether this is the right auction depends on your financial situation. Thankfully, banks are not in the habit of keeping properties and are likely to sell properties at a competitive price. Another advantage of buying a property like this is that banks settle outstanding municipal rates and taxes before selling, reducing financial risks for you, the buyer.

Are Property Auctions Right For You?

Buying property at an auction can be a great way to secure a home or investment at a competitive price - but it’s not the right approach for everyone. Auctions come with opportunities and risks, and your success depends on your financial readiness, knowledge of the auction process, and risk tolerance. Here are a few examples of when it’s right for you:

If you can act fast, it may be right for you: Auction sales require quick decisions, immediate deposits, and short settlement periods. If you have financing ready or can pay cash, this buying method may suit you.

Buyers Looking for Unique or High-Demand Properties: Rare properties, such as heritage homes, large plots, or commercial buildings, sometimes appear at auctions. If you're searching for something outside the typical listings, auctions might be worth exploring.

Risk-Tolerant Buyers: Property auctions involve some uncertainty - like hidden costs or unexpected legal complications. Buyers comfortable with some level of risk and who are willing to do their homework will be better suited to property auctions.

How Do I Find a Property Auction

If you're interested in buying a property at auction, the first step is knowing where to find them. Property auctions take place regularly across South Africa, and Auction Calendar is your go-to platform for discovering upcoming listings.

Whether you’re searching for your first home, an investment property, or commercial real estate, we provide a comprehensive selection of auctions to suit your needs.

Find your next property auction today on Auction Calendar!