Despite selling of stock - problem persists
Despite significant action by the banks to clear urgent sale stock out of the market, Seeff chief executive officer, Stuart Manning says that the problem persists.
The reality is that the continued economic constraints and basic cost hikes means that around one third of the housing market is still in distress. It is vital for the recovery of the property market, that this debt is cleared out of the system this year, he adds.
The primary objective is always for these home owners to retain their homes, but more often than not, the financial outlook of these owners is such that retaining these homes just puts them further into debt, continues Manning. People in financial difficulty are generally reticent to make contact with anyone that they owe money to. Our agents continue to encounter sellers in severe financial difficulty who are simply too afraid to approach their bank.
The issue is two-fold, he says, many home owners are not aware of the bank rescue packages and more action is needed to speed up the clearance of these properties out of the market. Following negotiation with the banks, we engineered our ESP (Express Sales Programme) to assist such home owners to sell their as quickly as possible for the best possible price.
Additionally, this programme assists such owners to secure the benefits of the banks' rescue packages such as a reduction of the loan amount and restoration of their financial standing. Manning says that this intervention is also aiding in getting properties sold before the execution process where these homes generally sell for between 40 and 50 percent of their value.
This says Manning has effectively created a two-pronged approach. The objective is to take the programme into the community. The intention is not to sell these properties for bargain prices, he adds. As one of the largest real estate agencies, we work in partnership with the banks to deal with this issue in a responsible manner. Since inception of the banks' rescue programmes, we have successfully managed literally thousands of mandates. Last year, we sold well over 700 of these properties at between 80 and 90 percent of the valuation.
According to FNB's latest Estate Agent Survey, around 20 percent of sellers are still selling to down-scale due to financial constraints. Manning says that since the start of this year, Seeff has already received over 550 new urgent sale mandates, but there are many more bond holders in distress. Our company and agents are committed to assist the banks and our local communities to alleviate this distress.
The most important consideration is for home owners to be informed about their options and to take decisive steps to minimize the risk of added financial stress and burden. This is not a problem that only affects the lower end of the housing market, says Manning. It cuts across the market and all income groups. It is also not just a problem that affects the major metropolitan housing markets of Johannesburg, Cape Town and Durban. It is not that there are more distressed properties in Johannesburg, he explains. The problem is relative; there are more people who live in the greater Johannesburg area, but the problem is no less severe elsewhere.
It is critical for home owners in financial difficulty to deal with the problem as quickly as possible. If your personal financial outlook remains bleak, the problem is not just going to go away. In such cases, it is better to downscale or rent for a while. The longer you sit with an unpaid mortgage, the more the interest accumulates and you could ultimately end up with a financial burden despite selling the property and benefiting from a reduction of the loan amount.
It is therefore critical that as much of this is dealt with as efficiently and responsibly as possible, he concludes.