Important Considerations
When acquiring a property through a Sheriff's Sale in Execution, it is essential to understand the process and key factors involved. A Sheriff is neither an auctioneer nor a real estate agent; they sell properties on public auction when in possession of a valid Court Order. The Sheriff's primary function is to recover outstanding debt in accordance with the Court Order. If the debt is successfully collected before the sale, the property will not be auctioned.
Why Are Properties Cancelled Before a Sheriff’s Sale?
Properties scheduled for auction may be cancelled prior to the sale if the outstanding debt is settled. It is important to be aware of this possibility when considering a property purchase at a sheriff’s sale.
Preparing for the Sale
If the property remains scheduled for sale, consider the following steps to make an informed decision:
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Property Inspection: View the property at least 14 days before the auction to assess its condition.
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Valuation: Conduct your own valuation or estimate how much the property is worth to you. While the Sheriff will publish the judgment debt (the amount stated in the Court Order) on their website, this does not reflect the actual market value of the property. However, it can serve as a general guideline.
Determining Additional Costs
Beyond the purchase price, several costs must be factored into your budget. Confirm the following outstanding amounts:
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Municipal Charges: Outstanding rates and taxes.
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Sectional Title Levies: Outstanding body corporate fees (if applicable).
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Homeowners Association Fees: Applicable in security estates or gated communities.
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Interest on the Purchase Price: Payable from the date of sale to the date of registration (typically around three months).
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Transfer Fees: Payable to the transferring attorney.
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Transfer Duties: Tax payable on property transfers.
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Legal Fees: Associated with the transfer process.
Example Cost Calculation
Description
Property Valuation
Less: Outstanding Rates & Taxes
Less: Outstanding Body Corporate Fees
Less: Outstanding Homeowners Association Fees
Less: Interest Payable (Approx. 3 months)
Less: Transfer Duties
Less: Legal Fees
Final Bidding Figure
Amount (ZAR)
R800,000.00
R40,000.00
R0.00
R15,000.00
R28,000.00
R20,000.00
R23,000.00
R674,000.00
Additional Considerations
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Verification of Outstanding Amounts: These figures may not always be readily available from the Sheriff. Conduct independent inquiries with relevant authorities such as the local municipality, bondholders, body corporates, and homeowners’ associations. Contact details for these entities may be obtained through property occupants or security personnel.
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Valuation Methods: Assess the cost of constructing a similar property based on square meter rates, evaluate historical bond registration amounts, and rely on your own market insights.
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Personal Due Diligence: The decision to bid should be based on thorough research and financial preparation. Once the property is purchased, buyer’s remorse is not an option.
After a Successful Bid
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Maintain communication with the transferring attorney and promptly fulfill any requirements to ensure a smooth registration process.
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Familiarize yourself with the Rules of Court and the Conditions of Sale, which are available for inspection at the Sheriff's office 20 days before the sale.
What If…?
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I am unable to pay the 10% deposit and Sheriff's commission?
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The Sheriff will immediately re-sell the property, and you may be held liable for any resulting financial losses. Review Condition No. 4 in the Conditions of Sale, which states that bids are only accepted provisionally until financial capability is confirmed.
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I am unable to secure a bond?
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The Sheriff will report the circumstances to the Court, which may declare the sale cancelled. The Court will decide how to distribute, alternatively refund any funds already paid.
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There is an existing tenant or occupier in the property?
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If the occupier is a tenant: You must honour their lease agreement, and rental payments should be redirected to you.
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If the occupier is the defendant: Negotiating a lease agreement with them may be beneficial until the property is transferred into your name, providing you with some rental income during the transition period.
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Final Thoughts
Although the process may seem complex, experience will make navigating these challenges easier. The most critical step is securing your finances in advance. The Sheriff has no discretion beyond enforcing the Rules of Court and the Conditions of Sale, so be well-prepared before placing a bid. For any questions or concerns, you are encouraged to consult the Sheriff’s office and review all relevant documents before the sale.