Professional help for distressed homeowners

Adrian Goslett, CEO of RE/MAX of Southern Africa, talks about this year’s distressed property trends in South Africa
While the distressed property situation in South Africa has improved since the beginning of the year, assisted by steady price increases in the lower price ranges and a resolve from homeowners to reduce their levels of debt, they are still very much a part of the new property landscape that we find ourselves in, says Adrian Goslett, CEO of RE/MAX of Southern Africa.
RE/MAX of Southern Africa reports that its assisted sales department has been handling an average of 50 distressed property sales each month, down on the 2012 average which was almost double that figure.
Goslett notes that even though trading conditions within the South African property market have shown noticeable improvement over the past year, the TransUnion SA Consumer Credit Index for Q3 2013 indicates that consumer loan defaults continue to rise and that household cash flow is deteriorating as living costs rise and job losses take their toll on incomes.
He says that the TransUnion data also shows that older loan portfolios still seem to be deteriorating. Added to this, current unrest in the labour market is dampening economic prospects and potential growth which could have an impact on unemployment levels in the medium term.
“TransUnion indicates that the household cash flow situation may be as challenging as early 2009, and job losses and job insecurity are intensifying the challenges that the increased cost of living are creating for consumers,” he says. “The fact remains that economic conditions are still challenging and consumers are still battling to control their levels of debt and adjust to the financial demands of the increased cost of living,” says Goslett.
He goes on to say that this is why RE/MAX of Southern Africa has continued with training its agents to handle this specialised kind of sale. “When it comes to handling distressed properties, it’s not just about selling a home, it’s about helping people deal effectively with a stressful financial situation.”
Goslett explains that when homeowners reach the point where they can no longer afford to stay in their home, the best alternative for both the homeowner and the financial institution that holds the bond is to relook at the finance options or to sell the property for the best price in the shortest possible space of time. “The primary concern for us, and the financial institutions, is to keep the homeowners in their property and to look for a way for the bank to restructure the debt so that it is more affordable or to sell the property with minimum impact to the owner’s capital or credit record. Should this be the case, it is in the homeowner’s best interest to make use of a reputable estate agency that has agents who are qualified to handle the nuances of a distressed sale.”
To date, more than 700 RE/MAX of Southern Africa agents have successfully completed the internationally acclaimed Certified Distressed Property Expert Professional Designation (CDPE), a course which was launched exclusively to RE/MAX offices in January 2011. The course is delivered under licence of the Charfen Institute based in the USA, which more than 60 000 agents from around the world have completed.
Goslett says that this year, South African distressed properties spent an average of 45 days on the market, down from the average of 48 days reported in 2012 and fell within a varied price range from as little as R200 000 up to the R4-million mark.
“The RE/MAX of Southern Africa agents who have been marketing these distressed properties have managed to achieve, on average, 92% of the asking price,” says Goslett.
However, he notes that homeowners shouldn’t 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 which holds the bond.”  Here a RE/MAX assisted sales co-ordinator 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.
“To date this year, RE/MAX agents have submitted 150 reverse leads back to the banks from clients wanting to sell their properties due to being in financial distress. This kind of success rate is directly linked to the professional training our agents have, which enables them to ask sellers the right questions and have knowledge of the right options and solutions for distressed sellers.”
Goslett also points out that more often than not, if the distressed property is sold for less than the outstanding bond amount, homeowners are able to benefit from discount solutions, which differ from bank to bank. Some banks will write off a percentage of the outstanding balance of the bond and others offer a substantial discount on the total short fall. In all cases the shortfall is then repaid, interest free over a period of time.
“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 which would impact heavily on finances, is to contact your financial institution or a real estate professional to assist you and discuss the options before it is too late,” says Goslett. “Most people who find themselves in financial difficulty 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,” he says.
With higher levels of consumer spending on the cards in the upcoming December holiday period, despite the increasingly high levels of debt being recorded and a high likeliness of interest rate hikes next year, Goslett says that homeowners would do well to have a sound financial plan for the year ahead and watch their spending carefully in order to avoid a distressed property sale becoming a necessity.

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