select
|

Is buying a repossessed property worth it?

While many may think that a sale of execution and a repossessed property are one in the same, they do differ, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.

“If a homeowner can no longer pay their bond and are in substantial arrears, the bank will take legal action by serving the owner with a summons, taking judgment and eventually attaching the property. If the homeowner is still in arrears by the time the property has been attached, the bank will instruct the sheriff of the court to provide with selling the property at a public auction,” Goslett explains. “A representative from the bank is entitled to attend the auction and purchase the home if the bidding amounts are not substantial enough to cover the outstanding balance owed to the bank. The home will become a repossessed property or property in possession once it has been ‘bought back’ by the bank at the sale in execution.”

Once the bank has purchased the property at the auction, it becomes the legal registered owner. “At this stage, one of two things are likely to happen. Either the bank will sell the property to recoup their losses, or in some cases, they may allow the previous owner to rent back the property from them on a month to month lease agreement,” says Goslett. “If the bank decides to sell they will advertise the property for sale. Certain banks will also provide lists of repossessed properties to real estate companies for them to sell.”

As a buyer, there are several benefits to purchasing a repossessed home – especially if the amount owed to the bank is less than the home’s market value. “Banks are not looking to make a profit on the sale, but merely recoup their losses, so buyers could find themselves a bargain by purchasing one of these homes. Another benefit is that because the bank is a VAT vendor, there is no transfer duty payable on a repossessed property. And the bank will need to ensure that the municipal accounts are up to date, so no need to worry about taking on someone else’s municipal debt,” says Goslett.

On the flipside, repossessed homes are often in poor condition and will require renovation. “Buyers will need to factor in the cost of the renovation on top of the purchase price to see whether they are really getting a bargain or buying a money trap. As with all property purchases, location is vital. It is best not to compromise on location just to get a perceivably good deal,” advises Goslett.

Another possible disadvantage is that if there are tenants in the property, the new owner will be responsible for vacating them. It could be as simple as giving the occupants notice, or it could entail going through the process of a legal eviction.  “While purchasing a repossessed property does have its perks, buyers need to be aware of the possible hassles and decide whether the purchase is still worth their while,” Goslett concludes.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 23 Jan 2018
      Many people only start thinking about home-ownership when they are ready to “settle down” or start a family, which is why first-time buyers these days are generally in their mid-30s, compared to those in the previous generation who were usually in their mid-20s.
    • 22 Jan 2018
      Moving away from the city to a country or coastal town and a slower-paced life is a frequent new-year resolution for South Africans, but thorough research should be done before you break free from the hustle and bustle, because making the wrong move could turn out to be a very expensive mistake, and even more stressful for you and your family than staying in the “big smoke”.
    • 22 Jan 2018
      Cape Town is home to many breathtaking and historic homes, but House Invermark designed in 1969 by South African architect Gilbert Colyn, with inspiration from two modernist icons: the Glass House by Phillip Johnson and Farnsworth House by Ludwig Mies van der Rohe is in a class of its own.
    • 22 Jan 2018
      2017 was a challenging year for the South African property market in general, despite small pockets of thriving activity in areas like the Western Cape. As we head into 2018, Tony Clarke, Managing Director of the Rawson Property Group, casts his eye forward to property trends and market influences that could make their impact felt in the New Year.
    • 19 Jan 2018
      Extending from Randfontein in the west to Roodepoort in the east and including the towns of Krugersdorp and Magaliesburg, the West Rand has a plethora of property available to residents who choose to make this unique area their home.
    • 19 Jan 2018
      When it comes to financial planning, doing the work to ensure you’re prepared for unexpected emergencies is just as important as ticking off your other goals and New Year’s resolutions. The beginning of the year is also the perfect time to review your various insurance policies.
    • 19 Jan 2018
      No surprises at the first Monetary Policy Committee of 2018, as Reserve Bank Governor, Lesetja Kganyago, announced that the interest rates would stay at their current levels.
    • 18 Jan 2018
      The Southern Suburbs make up some of the most popular residential areas in Cape Town, comprising charming groups of suburbs which lie to the south-east of the slopes of Table Mountain. It is seen as the city's most expensive residential neighbourhoods with a choice of various private schools, upmarket eateries, wine estates, beautiful homes and trendy apartments.
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK