Sobering statistics from Credit bureaux across South Africa suggest that half of the 18 million credit users in the country, have an impaired credit rating under the current lending criteria adhered to by banks. Risk analysis from the banks estimate that as many as 70% of their clients who enter into a repayment contract with creditors, will default on those agreements within the first year of inception. So what does this mean for the property market in this country?  With a debt-to-disposable income ratio in South Africa of approximately 75%, it is likely that distressed properties entering the market will still be a reality during the remainder of this year.
Warwick Heny, Broker/Owner of RE/MAX Kowie, situated in the Port Alfred area, explains that a distressed property is one where the amount owed to the bank by the homeowner exceeds the current market value of the property and in which the homeowner is in arrears with the bond repayments. “These properties can be found countrywide in all areas and across a variety of price brackets.”
Invariably repossession is that next step if the homeowner continues on this path without seeking help, says Heny. “Many homeowners choose to do nothing, but this is the worst thing they could do. If a property is repossessed by a bank and a judgment is taken against the homeowner, this could tarnish their credit record for the next 30 years. The homeowner is still liable for the outstanding debt and is unlikely to be able to obtain credit in the future,” he says. “Banks prefer not to own and sell property, and are highly motivated to avoid having to repossess properties. For this reason, all four of the major banks have established a process of bank facilitated distressed property sales in conjunction with real estate professionals.”

Homes sold through repossession statistically achieve more than 30% less on average than the property would have achieved had it been sold through a voluntary process, using an estate agent qualified to handle a distressed sale.
RE/MAX of Southern Africa launched an internationally acclaimed Certified Distressed Property Expert Professional Designation (CDPE) course last year exclusively for its agents. The course is delivered under licence of the Charfen Institute based in the USA which has already trained over 60 000 agents from around the world to handle distressed sales. Heny explains that the course focuses on the alternatives that professionally trained agents can offer homeowners who have found themselves in financial distress.
Heny notes that three of his five agents at RE/MAX Kowie are Certified Distressed Property Experts who have been trained extensively to understand the options, and more importantly the solutions for homeowners in financial difficulty. “Different programs are offered by each bank. Our agents are equipped to understand and match the best program and option to each homeowner,” he says. “There are unique differences between a distressed property sale and a regular sale, which is why it is so important that the homeowner deal with a real estate professional with the training and experience to deal with this particular type of transaction.”  The RE/MAX Kowie agents who have completed the CDPE course are Kathy Botha, Anne Williamson, and Heny himself.
RE/MAX of Southern Africa agents who have been marketing distressed properties have managed to achieve, on average, 91% of the asking price. In addition, the number of offers that have been accepted by the banks has increased considerably and distressed properties have spent an average of 45 days on the market before selling
Peter Gilmour, Chairman of RE/MAX of Southern Africa and head of the group's specialised distressed property department, says that to date over 600 RE/MAX agents around the country have received the internationally acclaimed Certified Distressed Property Expert Professional Designation. He notes that RE/MAX of Southern Africa received over 500 new sole mandate distressed property leads this year from the various financial institutions for which the group is one of the preferred partners for handling distressed property sales.
“While enduring financial difficulties is challenging for any family, the process of finding a qualified real estate professional should not be. Selecting an agent with the CDPE Designation ensures you are dealing with a professional trained to address your specific needs,” Heny concludes.

Photo from left to right: Anne Williamson, Warwick Heny and Kathy Botha.

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