Don't dump your property on to the market

Homeowners should not be panicked into selling their properties if they are feeling the interest rate pinch.

Gerhard Kotzé, CEO of the ERA South Africa property group, points out that a rushed sale could result in a poor price and while that's great for a buyer looking for a bargain, it's simply not good business for the seller".

Homeowners have seen interest rates increase by four percent since mid-2006 and understandably, household budgets have come under strain. This has tempted many to consider selling up quickly and moving to a cheaper property or rental accommodation.

"There are pitfalls, however. If you sell your property in a hurry, you could actually realise less than its market value and possibly even less than the outstanding loan amount.

"Secondly, property remains the best way of building wealth. Continuing to pay rent indefinitely, without any investment return, is clearly not wise."

On the other hand, he says, the intention may be to sell with the idea of biding your time until interest rates decrease again and theoretically make property more affordable.

"The fallacy of this argument is that you will almost certainly not time the market correctly and when you do decide to buy again, prices are likely to have increased, offsetting any decrease in interest rates.

"The banks are also not keen on you disposing of your property under financial duress and they would certainly wish to avoid repossessing the property. Accordingly, you will almost invariably find they make every effort to ensure you can remain the owner.

"That could, for example, involve extending the life of your bond from 20 years to 25 or even 30 years, so reducing your monthly repayments although of course greatly increasing the ultimate cost of the property in the process.

"But if, in spite of considering all your options, you still believe you have to sell, at least bring in an expert estate agent who will realise the best value for you."
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