Don’t be hammered at an auction

With South Africa battling under the weight of an economic crisis, consumers and businesses are turning to auctioneers to convert their unwanted goods into cash, and to auction to find bargains.

“Buying on auction has given consumers a reprieve from skyrocketing prices and is allowing them to buy the cars, equipment, properties and general goods that they want at more affordable prices,” says Sonja Styger, the national manager of the South African Institute of Auctioneers (SAIA).

“These combined factors have led to the growing popularity of auctions in recent times and given rise to a proliferation of new auctioneers, as well as existing auctioneers growing into the online arena to expand their reach,” she says.

Don’t be intimidated

Styger says newcomers need not be intimidated by the language used at auctions or by auction etiquette, because the terms and conditions will be stipulated upfront, whether it be an onsite or an online auction.

“It’s easy; participants need simply bid by waving their bidder’s paddle onsite or by pushing the bid button online.”

She says some auctions may have a reserve price, which stipulates the lowest bid admissible. Items can also be sold subject to confirmation. This information will be properly communicated, she says.

“Bidding can be a game of poker, in which bidders withhold their intention until the closing stage, or it may be energetic and interactive. This will depend on the auctioneer’s ‘reading’ of the audience. Cues such as eagerness, nervousness or indecision can be picked by the auctioneer, who will guide the bidding accordingly,” she says.

How to prepare?

Bidders should familiarise themselves with common auction terminology, such as reserve (the minimum price that will be accepted), fall of the hammer (the sale is closed and the highest previous bid is accepted), subject to confirmation (the successful bid needs to be accepted by the owner) and bidding increment (the amount by which each bid goes up; this is set by the auctioneer and will be made known).

Know what you are prepared to spend, and make sure the money is immediately accessible. Do not get carried away and offer more than your budgeted amount.

Viewing prior to bidding is imperative, she says, adding that if potential buyers have questions about the condition of an item, they should talk to the auctioneer beforehand.

Generally, she says, auctioneers give no guarantees or warranties unless specifically undertaken by the auctioneer in writing. They cannot be expected to provide guarantees on items that they do not own, but are selling on behalf of consignment sellers.

What if you are the winning bidder?

“If successful, bidders are usually required to pay via immediate EFT and to take possession of the assets. If the assets are immoveable or too big, then deeds need to be obtained or transport arranged,” says Styger. This means that you should not buy anything at an auction unless you are good for the cash or, in the case of property that needs financing, you have bond pre-approval.

In the case of a property, a deposit – usually 10% – is required up front and the balance of the purchase price must be guaranteed within a set time. Make sure you establish these details before auction day.

Once the hammer falls and the deal is concluded, you carry all the risk for the item or property bought.

Remember, the fall of the hammer price does not include VAT, the auctioneer’s commission or VAT on the auctioneer’s commission. “In some cases, VAT on the assets will not be applicable, but this will be stipulated in the terms and conditions.”

Voetstoots

Goods are sold at an auction on a voetstoots (as is) basis. This means there is no cooling-off period or warranty.

With properties, however, defects must be disclosed in a condition report. Make sure you do your due diligence, such as having the building inspected, before auction day, if this is allowed by the auction company. Also, make sure you read the sales agreement and conditions of sale and ensure a condition report of the property is provided.

Visit the SAIA website www.auctioneering.co.za for your enquiries, list of members, industry-related information and upcoming auctions.