When selling your property via online auction, how do you know what price to expect? And what is the difference between a reserve and a guide price?
Auctions are now accepted as a quick and effective way of fetching a market-related price.
Explains MC du Toit, chief executive auctions and sales for BidX1 South Africa, a reserve price is the undisclosed minimum sum the seller will accept, agreed upon with the auctioneer. This is not to be confused with the guide price, which as the term suggests, is just a guideline.
Du Toit said: “The reserve price can be reduced by the seller if required, based on information provided by the auctioneer during the pre-auction marketing period. The reserve price must be at a level which the seller is comfortable to accept. The highest offers will be presented to the seller and any bid could be accepted, as is the norm with any auction.
“… it is not easy to gauge what we will [get] at auction, and we will only have a good idea once we have started marketing. As experienced property specialists, we will assess the property and advise on what we believe to be a market-related price.
“Being an auction where everyone is invited to bid, and with the ease of bidding on-line making the process even more accessible and transparent, anything can happen. There have been instances where we have exceeded the reserve price, and conversely cases where the seller has accepted below reserve price…”
This raises the next question – how does the auctioneer gauge its value? Du Toit says value is determined by various key aspects, including the condition of the property and its location.
“For example, in terms of residential property, certain areas have different price ceilings [so] you will not easily achieve R6 million when the average sale price for the area is R3 million.
“Commercial properties are easier and value is determined by the return on investment. What is interesting is that in most instances, the majority of buyers calculate more or less the same yield, and this serves to create competition, with the purchaser being compelled to buy at a lower yield than anticipated.
“End users hold a different value to a property, and that can only be determined at the auction.”
Du Toit says buyers will need to conduct a proper due diligence on and inspection of a property. “We are available to advise buyers and will list a guide price – which is in no way a reflection of the opening bid or reserve price.
“When [buyers] register to bid, we provide all the information available, including title deeds, surveyor general diagrams, rental agreements, homeowner’s rules and more. We conduct show days and recommend buyers attend these to get a good feel for the property.”
Another question raised is how an auctioneer knows if the bidding is “stuck” and what can be done to get it moving again?
Says Du Toit: “As the auctioneer, I will monitor the bidding throughout to ensure everything runs smoothly. We are always available and will make contact if we think a bidder might be having difficulty. Interestingly, 85% of bidding takes place in the last five minutes.”
What about “ghost” bidders? Du Toit says BidX1 will not permit anyone to be able to bid unless they have registered “[so] no one will be allowed to unethically drive up prices. Fairness and transparency are key advantages of our platform.”
Once a bid has been approved, the normal transfer process will follow.
To sell your property or to register to bid go to bidx1.com and click on South Africa, or e-mail MC du Toit on firstname.lastname@example.org.