Economic conditions around the globe have remained depressed, and as such, consumers the world over are still battling to control their levels of debt and adjust to the financial demands of the increased cost of living.
Peter Gilmour, Chairman of RE/MAX of Southern Africa, who heads up the group’s Distressed Property Division, says that in light of economic conditions, distressed properties will remain a reality during 2012.
He notes that during 2011, a fair amount of the distressed property supply was mopped up. The RE/MAX Distressed Property Division handled over 750 distressed property sales around the country through various financial institutions last year. These properties were valued between R500 000 and R4 million.
“In our distressed property sales we managed to achieve an average of 90% of the asking price for these properties, with 80% of the homes only sitting on the market for 45 days or less,” he says.
When it comes to handling distressed properties, Gilmour emphasises that the main aim is to keep people in their homes and says that the South African banks are very proactive in assisting homeowners who find themselves in financial difficulty.
“Over the past year, South Africa’s financial institutions and estate agents have done their utmost to keep as many people in their homes as possible and will continue to work hard to ensure this throughout 2012. However in the instances where there is no other option but to sell the home to assist the homeowner in reducing their level of debt, the various banks will make use of distressed sale programmes to assist in reducing the homeowner’s liability and the period of liability,” says Gilmour.
Gilmour 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 sell the property for the best price in the shortest possible space of time. “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. RE/MAX of Southern Africa has over 500 of its 1 750 agents around the country who have been trained as Certified Distressed Property Experts. Further certification training will take place early this year.”
Gilmour says that during the first week of the year, RE/MAX of Southern Africa received over 30 distressed property leads from various financial institutions. Added to this, Gilmour notes that many South Africans, if they were lucky enough to receive bonuses at the end of last year, spent the extra cash on covering expenses instead of reducing their debt as they should have. “Consumer spending over December was particularly high, especially in light of the stressed financial positions many consumers are in.”
Dave Liniger, founder of RE/MAX, predicts that housing inventory in the US will increase this year due to more foreclosed properties hitting the market. “Foreclosures in the US are expected to increase, and we anticipate that they will make up around 50% of all property sales during 2012,” he says. However, he also says that lenders in the US will work to improve upon the short sale process, in order to help financially distressed homeowners avoid foreclosure.
While distressed properties in South Africa are not expected to hit the 50% mark, Gilmour says that the amount of distressed homeowners will more than likely increase in the year ahead. “Times have been tough, and they are bound to get tougher yet,” says Gilmour. “Homeowners will continue to struggle to meet their financial requirements, and more homes are due to come onto the distressed property market in 2012 as a result of this.”
However, Gilmour believes that the distressed property situation will correct rapidly from the beginning of 2013, assisted by steady price increases in the lower price ranges and a resolve from homeowners to reduce their levels of debt.