Advice and Opinion

Commercial Property Purchase at Auction: How and Why to Bid

The ClareMart Auction Group presents the third in a series of “How’s, When’s and Why -To’s” for sellers, buyers and those interested in commercial, investment, residential and luxury property as well as movable assets.  The directors and managers within the Group will over the next few months be contributing their knowledge and expertise in order to educate the auction market and answering the many frequently asked questions relevant to the industry.

Mike Baigel, Executive Auction Director, feels that the third instalment in the series should be aimed at those investors who are looking to enter the stable and lucrative commercial property market. Baigel has highlighted queries put to him by the many first time bidders attending the Group’s auctions and who are asking valid and similar questions regarding purchasing commercial property.

  • Why buy Commercial Property via auction? The auction mechanism has over the past decade undergone a transformation within South Africa that has steadily seen the process of auction becoming the natural first choice in the sale of commercial property in particular. 
  • What does a buyer need in order to bid when attending an auction? When attending an auction, bidders are required by the terms and conditions of the Consumer Protection Act, to register prior to the bidding process. Bidders are also required in terms of the Act to provide the auctioneers with a copy of their valid identification documents as well as to furnish the auctioneer with a FICA document which is no more than three months pre-dated. 
  • What available finance does a buyer need on the day? What is important to note here is that when bidding on a property the bidder must have the deposit required to secure their bid as well as the auctioneer’s commission. This deposit may vary in size depending on the auction house or the property being auctioned and the acceptable methods of payment are bank guaranteed cheque or electronic transfer. 
  • What happens after auction regarding finance? Bidders are advised that auction sales have no suspensive conditions and therefore they must be certain that they are able to provide the necessary funds to purchase the property. Should the bidder require finance by means of a bond, he or she should ascertain prior to auction that a financial institution would be willing to loan the required amount based on the bidder’s credit rating. Once the offer is accepted by the seller, normally within a ten day period, the bidder is then granted between thirty and forty five days in which to provide a Letter of Guarantee for the balance of the purchase price. 
  • How do I go about purchasing commercial property? Prospective bidders are advised to thoroughly inspect the property prior to the auction. A reputable and professional auctioneer will provide a bidder with a detailed catalogue that includes a perfunctory due diligence, undertaken on their behalf. We seriously advise that bidders ask as many questions and approach as many sources such as town planning and municipalities, to ensure the information regarding zoning, usage, height and bulk allowances are correct and suitable for their purposes. Bidders are also advised to appoint a property professional or conveyancer to scrutinize the title deeds, particularly where a development or redevelopment is intended. Bidders are also urgently advised to request valid financial statements and current leases for income generating property. 
  • What are the Advantages and Disadvantages of Purchasing Commercial Property at Auction?  
  • Transparency which is intrinsic to our auctions is the fundamental advantage here. Seeing the demand for a property by the amount of bidders bidding on it and the level of demand in the prices that are being bid, all give the indication of market worth for that property. That cannot be achieved in a signed offer where the bidder is competing against unknown competitors offering unknown amounts.
  • The immediacy element of an auction also benefits the highest bidder in knowing that his or her bid will be taken under serious consideration by the seller and confirmed within the stipulated time frame. There is a peace of mind in knowing whether your bid will be considered or not. This allows buyers to continue their search for the ideal property and not lose out on other opportunities.
  • Those other opportunities are another advantage apparent only at auction. There are a few select premier auction houses, including ourselves, who facilitate multiple commercial auctions that showcase their entire portfolio. That means that the bidder sees all the opportunities available as opposed to having one agent guide them to his personal stock only, thereby limiting the bidder’s scope and opportunity.
  • The disadvantages of acquiring commercial property at auction are limited however, the most apparent presents itself in the form of the inability of the purchaser to allocate any suspensive conditions on their bid. A bid is not an option and there are therefore no conditions attached and as such financial approval and due-diligences need to be undertaken before attending the auction and bidding on the property.
  • What do we need to look out for? The legalities of the auction process including the auctioneers Conditions of Sale should be scrutinized by the bidder. These rules differ slightly between auction houses however reputable auctioneers will have fairly similar conditions. We also caution bidders to ascertain the credentials of any auction house. Auctioneers should be registered members of the South African Institute of Auctioneers (SAIA), of which our Group is a founding member, and hold a valid Estate Agency Affairs Board certificate and must also be fully FICA compliant.

Baigel concludes by stating that sellers who are requiring to disinvest of their commercial property are consistently choosing auction as their preferred method of disinvestment and the result therein is that premier auction houses are most often marketing the majority of higher value commercial and investment property opportunities. “We are seeing a better quality of commercial and investment property stock on our auction floor and this should be a great motivator for the first time commercial property buyer to attend auctions and be exposed to the atmosphere and way in which the business is conducted on the auctioneer’s block”.


This information is published for general information purposes and is not intended to constitute legal advice. Specialist legal advice should always be sought in relation to any particular situation. Property Wheel will accept no responsibility for any actions taken or not taken on the basis of this publication.

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