An auction is a public sale where a willing buyer and a willing seller exchange movable or immovable goods on an open, free and fair public platform by offering them for bidding, and selling to the highest bidder. The bidders compete against each other, with each subsequent bid being higher than the previous one. An auction is complete when the auctioneer accepts the highest bid offered and the buyer pays for the asset.
You can’t have an auction without an auctioneer. Auctions take place online or live or you can have a hybrid or virtual event where the auction happens online and live at the same time. Traditional auctions start with an auctioneer; the excited guy at the front shouting out numbers who hopefully doesn’t scare the buyers or sellers! You’ve got to have a free and fair public process from a willing buyer to a willing seller, and regardless of the platform, auctions work best when there’s total transparency in bidding, with the market dictating the price.
Anybody can bid on an auction whether you’re local, international or from another planet for that matter! As long as the registration deposit is paid and the legally required FICA (Financial Intelligence Centre Act) documents are submitted before the auction starts, anyone is welcome to bid.
The registration process for an auction is very simple. In South Africa the law requires the submission of FICA (Financial Intelligence Centre Act) documents, which are proof of address and some form of official identification. The registration process is important; it protects buyers and sellers, as well as auctioneers who have to comply with South African auction laws including the Consumer Protection Act. It’s also necessary for auctioneers to be able to identify bidders participating in a sale and they do this by having their FICA documents on site.
Bidders must supply FICA (Financial Intelligence Centre Act) documents to register for an auction. This is to fulfil the auctioneer’s conditions of sale, as well as South African legal auction requirements. Bidders must supply proof of address and some form of official identification and this has to be done in pre-registration before the auction takes place.
Most auction companies charge a registration fee. This is to get bidders to register and verify their identities prior to an auction taking place. If you are not the highest bidder on your chosen lot, the full registration fee will be refunded by the auctioneer.
On an auction typically the buyer pays the auctioneer’s fee and real estate auctions are the same. This differs from property transactions through estate agents where sellers are responsible for fees. Put in simple terms, on auction if your winning bid on a property is R1 million, factor into your costs an average auctioneer’s commission of 10% over and above that.
A reserve price is an undisclosed minimum value that a seller sets with the auctioneer prior to his property going on auction. Specialist auctioneers always offer professional valuations and guidance to sellers to help them decide on market-related reserves, but the seller has final discretion on this figure. Reserves are by definition undisclosed prices that protect sellers, but on the day bidders and market demand will dictate the value of the asset.
It’s absolutely true that auctions are the best place to find good deals, but perhaps more importantly they’re also best for finding the greatest stock. Some of the most valuable sales in the world take place via auction; just think about art, classic cars or luxury real estate. In the past we’ve had clients ask us how to sell their Picassos, and the truth is you don’t – you auction them. It’s very difficult to determine what an asset is worth, especially a high-quality asset, without an auction. The better the quality of an asset, the more suited it will be for auction. So, it’s true that you can find great deals on auction, but you can also find the best assets. And from a seller’s point of view, an auction is the one and only platform where prices will always ascend; they’re never going to descend.