A new idea to help property market recover

Recovery in the residential property market would happen a lot faster if lenders were more willing to share risk with distressed homeowners.
So says Sandy Geffen, a director of Sotheby’s International Realty in South Africa, who notes that there are still thousands of homeowners in trouble as a result of the recent recession.
“Job losses mean many can’t make their monthly home loan repayments, and the 2009 slump in prices means many can’t even sell their homes for as much as they owe on them. As a result, the number of distressed sales and repossessions continues to mount.”
However, she says, there is an alternative, as proposed by Alex Perriello, president and CEO of Realogy, the parent company of Sotheby’s International Realty, in a recent New York Times op-ed article.
Quoting Perriello, Geffen says that rather than being at odds with defaulting homeowners, lenders should consider partnering with them in long-term equity-sharing arrangements.
“In his article, Alex explains how this would work in the case of a homeowner who purchased a house in 2004 for $300 000 and has since seen it drop in value by 50% to $150 000.
“In an equity-sharing arrangement, the lender would write a new loan for $150 000, retire the original $300 000 loan and, to make up for that loss, take a 50% deeded ownership interest in the property. The homeowner would also agree to split 50% of the net proceeds of any future sale of the property with the lender.
“The new arrangement would also include a buyout provision, so that if the homeowner ever wanted to take over the lender’s share, he would simply pay the lender a predetermined amount of cash.”
She says such a plan would be relatively easy to put in place, and would be a boon for everyone involved. “Homeowners could stay in their homes and preserve their credit (assuming they keep up repayments on the new loan). The neighbourhood would avoid repossessions, which depress property values. And the lender can participate in the upside potential when the house eventually sells.
“Consequently, we believe it is really worth consideration by SA’s big lenders.”

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 15 Jun 2018
      The second quarter of 2018 has proven to be the turning point for Midrand’s real estate market, especially the upper end which started to waver towards the end of a tumultuous 2017 with a notable drop in both sales and average selling prices.
    • 15 Jun 2018
      According to data recently released by FNB, the average age of a South African home buyer has increased from 38 to 44 this year. In an attempt to help first-time buyers enter the market sooner, Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, walks us through the steps of saving for your first home.
    • 15 Jun 2018
      Putting your house on the market can be a stressful process. There are so many decisions to make that will impact how quickly your house is sold and for how much you can sell it for. It’s a serious money game where you can’t afford to make the wrong decision.
    • 14 Jun 2018
      The word tourist describes someone who is visiting South Africa for a limited time and is probably not going to buy a property here – so why is the tourism industry so important to the real estate sector?
    • 14 Jun 2018
      Serengeti Estates has entrenched its status as one of Johannesburg’s most desirable addresses for a spectrum of homeowners with its launch of The Signature Residences, a new cluster village.
    • 14 Jun 2018
      Keen interest shown at an international event in Hamburg last month has revealed that German investors have a surprisingly healthy appetite for South African real estate, especially those in the market for retirement properties.
    • 13 Jun 2018
      Well located urban properties, from that convenient city pad to the family townhouse or the coveted buy-to-let property can provide buyers with great investment returns over the long term. This is according to Fine & Country which have a number of offices in Johannesburg specialising in the sale of urban properties.
    • 13 Jun 2018
      A R200 million 51-unit luxury apartment project on a vacant lot at 169 Main Road Green Point places the capstone on the radical transformation of the stretch between de Waterkant and Glengariff Road.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us