Trou­bled own­ers must act quickly

Peter Gil­mour of RE/MAX gives Home­Front some in­sight into dis­tressed prop­erty sales tak­ing place around the coun­try

Business Day - Home Front - - NEWS -

Q AHow is RE/MAX of South­ern Africa in­volved in the dis­tressed prop­erty mar­ket? RE/MAX of South­ern Africa is work­ing with First Na­tional Bank, Stan­dard Bank and Ned­bank to as­sist their clients to dis­pose of the prop­er­ties they can no longer af­ford in a timely man­ner, thereby avoid­ing the dev­as­tat­ing ef­fects of an ad­verse credit rat­ing.

As chair­man of RE/MAX of South­ern Africa I head the RE/MAX as­sisted sales depart­ment that man­ages about 200 dis­tressed sale leads a month. Over the past three years while work­ing for RE/MAX in the US I gained ex­pe­ri­ence in the dis­tressed prop­er­ties area while work­ing with the Dis­tressed Prop­erty In­sti­tute and ma­jor US banks that faced sim­i­lar prob­lems to what our banks are ex­pe­ri­enc­ing to­day. Why has the phe­nom­e­non of dis­tressed prop­erty sales be­come such a big is­sue in South African real es­tate? SA’s fi­nan­cial in­sti­tu­tions found out early on that re­pos­sess­ing prop­er­ties and tak­ing them to auc­tion — which was the tra­di­tional way of deal­ing with a home­owner’s in­abil­ity to meet bond re­pay­ments — was not work­ing as they were achiev­ing less than 50% of the prop­erty’s value. Ex­pe­ri­ence has shown SA banks that it is much more ben­e­fi­cial for all par­ties concerned to cre­ate a part­ner­ship with real es­tate pro­fes­sion­als who work per­son­ally with the home­own­ers to get the best end re­sult.

For ex­am­ple, Ryno Mey, First Na­tional Bank’s (FNB) na­tional quick sell man­ager, says that the bank’s pro­gramme ac­tively of­fers fi­nan­cially stressed cus­tomers a tan­gi­ble so­lu­tion in their time of need. This pri­vate-sale op­tion en­ables the cus­tomer to sell their prop­erty vol­un­tar­ily in the short­est pos­si­ble time and al­lows them to move for­ward with their lives, clear of a debt bur­den that they can no longer ser­vice. All nec­es­sary steps are taken to en­sure that the prop­erty is mar­keted and sold in the quick­est pos­si­ble time at the best achiev­able price, which greatly re­duces the time and ex­penses of the usual re­cov­ery pro­cesses. How does the dis­tressed prop­erty sale process work? Bank-re­pos­sessed prop­er­ties are the re­sult of home­own­ers con­tin­u­ally fail­ing to pay their home-loan in­stal­ments to the point where the home loan is can­celled by the fi­nan­cial in­sti­tu­tion that granted the loan. The re­pos­ses­sion process is started when a home­owner de­faults on the home loan to such an ex­tent that the only op­tion for re­cov­er­ing the debt is by re­pos­sess­ing the prop­erty. A rel­a­tively new method of re­cov­er­ing the debt from dis­tressed prop­er­ties is sell­ing them through rep­utable es­tate agents in a dis­tressed sale. Should the bank’s re­serve price not be met the bank has the op­tion to buy back the prop­erty.

In a dis­tressed sit­u­a­tion where home­own­ers sell their prop­er­ties for less than the value of their mort­gage, the var­i­ous banks re­quire a per­cent­age of the short­fall to be re­paid by the Chair­man of RE/MAX of South­ern Africa clients.

Prop­er­ties are only re­pos­sessed by the banks when the home­owner con­tin­u­ally fails to pay the home loan in­stal­ments to the point where the home loan is can­celled by the fi­nan­cial in­sti­tu­tion. In an ef­fort to as­sist home­own­ers who are no longer able to af­ford their bond re­pay­ments the banks are now sell­ing these dis­tressed prop­er­ties through rep­utable es­tate agents for a mar­ket-re­lated price.

While the banks’ method of dis­tressed prop­erty sales has been suc­cess­ful, home­own­ers need not wait un­til they are about to lose their home to sell it through an as­sisted sale pro­gramme.

Home­own­ers who find them­selves in fi­nan­cial dif­fi­culty have the op­tion of vol­un­tar­ily sell­ing their home through the RE/MAX as­sisted sales depart­ment be­fore they are re­quired to do so by the fi­nan­cial in­sti­tu­tion that holds the bond. A RE/MAX as­sisted sales coun­sel­lor will be able to ar­range for the fi­nan­cial in­sti­tu­tion that holds the bond to en­rol the home­owner on the as­sisted sales pro­gramme, where they would then ben­e­fit from the dis­counts and in­cen­tives that the var­i­ous banks’ pro­grammes of­fer. What is cur­rently hap­pen­ing in the dis­tressed prop­erty mar­ket? To date the RE/MAX as­sisted sales depart­ment has achieved an av­er­age of 80% suc­cess on all of­fers to pur­chase sub­mit­ted to the banks on their dis­tressed prop­er­ties. These prop­er­ties are sold on av­er­age within 30 to 45 days and on av­er­age also achieve more than 85% of the ask­ing price.

Our dis­tressed sales leads re­ceived from the banks range from prop­er­ties val­ued at R200 000 up to homes val­ued at R3,8m, al­though most dis­tressed prop­erty leads we re­ceive are for homes val­ued be­tween R700 000 and R2m. To date RE/MAX agents in south­ern Africa have suc­cess­fully sold hun­dreds of dis­tressed prop­er­ties, which have var­ied in price from as lit­tle as R100 000 to the R4m mark. What is your ad­vice to home­own­ers? The key for home­own­ers who see a fi­nan­cial prob­lem com­ing in the fu­ture due to job loss, a re­duc­tion in ben­e­fits, un­fore­seen cap­i­tal ex­pen­di­ture, pos­si­ble fu­ture in­ter­est rate rises, a death in the fam­ily or any event that would im­pact heav­ily on fi­nances, is to con­tact your fi­nan­cial in­sti­tu­tion, mort­gage bro­ker or a real es­tate pro­fes­sional to as­sist you and dis­cuss the op­tions be­fore it is too late. Most peo­ple who find them­selves in fi­nan­cial dif­fi­cultly may find this a dif­fi­cult thing to do as their pride or ego makes them think that the prob­lem will go away. This sel­dom hap­pens. What is the fu­ture for the dis­tressed prop­erty mar­ket? We an­tic­i­pate that dis­tressed prop­erty sales will to con­tinue to be a re­al­ity for the next three to five years. Dis­tressed home­own­ers should take the op­por­tu­nity to sell their home and nul­lify their debt be­fore they get to the point where they could lose it and po­ten­tially get a bad credit rat­ing that will af­fect them for many years to come.

This three-bed­room home at 165 Gie Road in Ta­ble View, Cape Town, with two full bath­rooms, three re­cep­tion ar­eas and dou­ble garage, is on the mar­ket for R1,195m with no trans­fer duty payable. There are 100% bonds avail­able plus the buyer will ben­e­fit from a 50% dis­count on at­tor­ney’s fees. Con­tact RE/MAX Prop­erty As­so­ci­ates’ An­ton Gous on 084 602 8732.

The RE/MAX of South­ern Africa As­sisted Sales Depart­ment, from left to right: Wrenelle Isaacs, As­sisted Sales Coun­sel­lor, Mer­cia de la Cruz, As­sisted Sales Coun­sel­lor; Fagh­mieda Mia, Se­nior Man­ager Fi­nance; Anthea John­son, As­sisted Sales Coun­sel­lor; Ch­ester An­der­son, As­sisted Sales Coun­sel­lor and Peter Gil­mour, Chair­man.

Sit­u­ated in Mid­stream Se­cu­rity Es­tate, Gaut­eng, this spa­cious three-bed­room town­house with large open-plan liv­ing ar­eas, built-in braai and pa­tio for the en­ter­tainer is on the mar­ket for R1,7m through RE/MAX Jowic. Con­tact Karin Piek on 082 971 9588.

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