In the wake of interest rate increases the number of Properties in Possession (PiPs) is starting to rise and attracting the attention of homebuyers in search of a good deal.
But, says Dr Piet Botha, chairman of the Nationlink estate agency group, they should exercise caution as there are several possible drawbacks to homes that have been repossessed by the banks because the owners defaulted on their home loans.
“The biggest potential problem is the condition of the property. PiPs are usually purchased voetstoots or “as is” from a lender so there is no guarantee of condition. And when owners realise they are about to lose their homes through foreclosure, it is not uncommon for them to stop caring for the property.
“They will not fix anything that breaks or malfunctions and the property can quickly become dilapidated. What is more, if the former owners are desperate or angry enough, they may even vandalise the property while it is being transferred – by turning on all the taps, plugging the drains and letting it flood, for example, or ripping out light fittings, floor coverings and kitchen cabinets.”
Buyers thus have to be sure that the price of a PiP or a property that is being auctioned in execution is low enough to compensate them for any work that might be required to bring the home up to market standard.
And, says Botha, they also need to be sure they will be able to get rid of the current occupants. “The previous owners may still be living in the home but the occupants of PiPs are also quite frequently relatives or friends of the previous owners, tenants or squatters – and the new owner may have to evict them.
“This may mean hiring an attorney could be a lengthy and expensive process. And tenants who are about to be evicted can also turn nasty and decide to damage the property.”
In short, says Botha, buying repossessed properties is not for the faint-hearted and is not recommended for first-time buyers, no matter how favourable the price may seem.