Another Home from R1 on bidorbuy

Is putting one of the most valuable assets a person is likely to own on a R1 no-reserve auction a desperate act or an astute strategy? 

(3 February 2009) On Wednesday February 4th, bidorbuy is to become once again the arena where bidders compete online for the ultimate reward: a home one of them will call his or her very own.

The home in question is a bachelor flat in Midrand, Gauteng. The auction, organized by the online property website Private Property, opens at eight in the morning and closes at ten in the evening, barring the last minute bids (in which case the duration extends for several minutes).

The bidding starts at R1 and there is no reserve. That means that the highest bidder walks away with the keys, no matter what the amount. The seller is obliged to let go of the property however dissatisfied with the price he might be.

This kind of auction is doubtlessly a boon for the buyers. They get to set the rules of the game. They get to set the price by deciding how much they are prepared to pay for the item on auction. Plus, for them there is the thrill of the bidding. As for the disappointment of the ones who get outbid - that is nothing in comparison with the heartbreak the seller might suffer.

What drives people to put one of their most valuable assets on a R1 no-reserve auction, at the mercy of fickle market forces? Is it an act of pure despair, born out of inability to sell, or is it in fact a carefully thought-out strategy to sell property faster, and at a better price than is likely to be achieved the traditional way?

Justinus Adriaanse, CEO of Private Property, explains:

“We guarantee the seller a certain amount that we agreed on. If the highest bid goes over that amount, the seller gets the whole benefit. If, however, it falls short of the agreed amount, Private Property will compensate the seller for the difference.”

That, of course, simply means that the bulk of the risk shifts from the seller to Private Property. To minimise the risk, Private Property people examine the property thoroughly, making sure there is nothing wrong with it before listing it on bidorbuy. Then they publicise the event, fairly confident that the attraction of a R1 auction will bring in the serious bidders.

Just to make sure the bidders are indeed serious, they have to agree to have a hold to the tune of R2000 placed on their credit cards. Only then they can qualify to participate in the auction.

Private Property views the whole exercise as an astute business move. They know that R1 no-reserve auctions generate ample interest among the 320,000 (and counting) strong bidorbuy community. On top of that, the company is certain to get lots of exposure – which is always an expensive commodity.

“Organising auctions like this one makes perfect sense, especially in the present sluggish property market”, say Justinus Adriaanse. “We have, of course, chosen to go with a small property, because they sell much better in conditions like these than big, expensive properties”. Private Property CEO expects the property dump, which started mid-2008, to last well into 2009, if not longer. Andriaase puts the time frame on the present property gloom at between six to eighteen months. And while the fall in the interest rates is good news, he warns that sellers ought not to raise their hopes: “It is going to take between six and nine months for these concessions and the drop in inflation to be felt in the housing market. With the financial pinch that the buyers are experiencing and with the oversupply of properties for sale, selling one’s property at all remains the biggest concern”.

This is the second R1 property auction Private Property has organised on bidorbuy. The first one ended happily, with the price reasonably above the reserve agreed upon between the seller and the online property website. It was held in November 2008. The highest bidder offered R390,000 for a two-bedroom apartment in Helderkruin, Gauteng. Private Property plans to hold one R1 no-reserve auction on bidorbuy each month.

About bidorbuy

bidorbuy is South Africa's largest online marketplace. Established in 1999, the company has created a safe and convenient way for people to buy and sell goods online. As a virtual trading place that brings buyers and sellers together and allows them to buy and sell virtually anything in an exciting auction format, using the Internet, bidorbuy has created a thriving online marketplace.