ADVICE TO STRUGGLING BONDHOLDERS: DO A DEAL NOW WITH YOUR BANKS
News > news - 13 Aug 2008
If you are struggling to pay your bond and have reluctantly come to accept
that you will have to sell your property to survive, now is very definitely
not a good time to being holding out for a price that the market is unlikely
to accept, warns Gary Wentzel, Head of Business Development at Rawson
Properties.

“Although it can be painful,” says Wentzel, “we have in recent weeks had to
advise certain sellers that the best course they can follow is to sell their
property for what the market will now pay and then see their banks about
paying off the shortfall on their bond.”

This course, says Wentzel, is far preferable to hanging in there until the
bank sequestrates the home. Repossessed homes, he says, are usually
auctioned and go for 40% to 60% of their market value - leaving the
bondholder responsible to the bank for far more than if he had sold by the
usual method.

“Many people think that once their homes have been sequestrated their
responsibilities are over, but this is not the case. They will be hammered
by the bank until they meet their debts and this could even result in their
eventually being declared bankrupt.”

When a home is sold voluntarily by the bondholder below the bond value, says
Wentzel, in his experience the banks will usually take a long-term view and
be prepared to do a deal with the bondholder that he will be able to afford.

“It has to be realised that banks have no desire to see a client go under -
it is simply not in their best interest.”

The current depressed market, says Wentzel, will, in his view, see an upturn
by the end of this year. In the meantime, he says, it is benefitting
landlords who have experienced a rise of approximately 20% in monthly
rentals this year. Buy-to-rent investors, he says, are now consequently
returning to the market and he sees this trend increasing towards the
year-end.

Asked whether agents should not be helping sellers by reducing their
commissions, Wentzel says that is happening and many commissions today are
being “negotiated”.

However, he warns, it can be just as shortsighted to push a hard-pressed
agent into a commission reduction, as it is to demand too high a sales
price.

“Every agent starts each day effectively unemployed. To survive, he will
probably concentrate first on sole mandates, secondly on correctly priced
properties (i.e. those that have the best chance of selling) and thirdly on
those with the best commissions. Sellers must accept that the agent, for
all his skill, cannot dictate to the market what it should pay for a
property.”

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