No need to stress about distressed properties

For a homeowner there are few financial stresses as serious as struggling to make your monthly bond repayments.

If you cannot work out a financial plan to keep your home, it’s best to put it on the market as soon as possible to recover the costs and settle with the mortgagor (typically the bank) before they take the necessary legal steps involved in foreclosing on a property.

Banks usually consider a property to be “distressed” when the homeowner can no longer afford the bond repayment and has consistently missed the monthly payments.

Strike before the iron is hot 

Contact a distressed property specialist when (or before) you default on a payment as they have experience in selling distressed properties and can advise you on the best way to make sure your home gets sold at the best possible price, in the shortest possible time. If you have built up enough equity, this option means that you may have enough money to pay off your outstanding bond, as well as other debt.

The foreclosure process by the bank can start as early as when the bond holder is two months or more in arrears. “In the banks’ experience once somebody is more than two months in arrears they are unlikely to catch up again and so they usually begin the legal process,” says William Verster, a certified distressed property expert and principal of Leapfrog Randburg.

The ideal is thus to beat the banks to it by voluntarily selling your property, before being forced to do so. It’s an undesirable situation for anybody but it’s important to be realistic and proactive about it, and to seek the necessary help and advice to settle it as favourably as possible.

If a mortgagee alerts the bank, or a distressed property specialist (like Verster), in time, they can help by selling the property at as close to its true market value as possible and draw on their network of attorneys to negotiate a real and amicable solution to the situation. The fact is the bank does not want your property and are ready to find a workable solution for recovering the loan, even if this means over an extended period of time. This means that banks may be prepared to re-finance the remaining debt, after sale of your property, over an extended period of time, without blacklisting you.

This is by far a more favourable outcome, when you consider that in order for the banks to foreclose on a property and take it to auction they are required to follow the legal process, which involves taking judgement against the owner. This automatically results in the borrower (mortgagee) being blacklisted for up to 25 years, Verster explains.

A bargain for buyers 

Purchasing a distressed property is great way to bag a bargain (!) if you’re in the buying market, as opposed to buying a property on auction.

When buying a property on an auction, all the debts associated with the property, like outstanding municipal fees and unpaid levies, become the responsibility of the buyer. Whereas when purchasing a distressed property through a qualified agent, all those costs are settled by the bank, who then seeks to recover them from the seller.

Another advantage for the buyer of a distressed property, rather than going the auction route, is that the purchaser has the opportunity of actually viewing the property, and is able to determine the true extent of dis-repair (if any), and cost these into his offer price.

It is important to remember that buying a distressed property can take a little longer than the standard sale time period, and although the seller may accept your offer, it would still require the bank’s approval, particularly in the case where the purchase price, and accumulated other related debts, may leave a large outstanding amount for the bank to recover from the seller.

The best of a bad deal 

Being forced to sell your property is not a situation that anybody anticipates but life happens and acting speedily when it does happen can save you a lot of stress, money… and your credit record. Don’t hesitate to get in touch with an expert to guide and support you in this process.

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WHAT is a Certified Distressed Property Expert (CDPE)?

A Certified Distressed Property Expert, is a property professional with specific understanding of the complex issues that confront homeowners in distress. CDPEs understand how tough it is! Through comprehensive training and market experience, CDPEs are able to provide real solutions for homeowners facing hardships in today’s market.

We have achieved the CDPE® designation. When you call us, you can trust that you are dealing with a professional, trained to address your specific needs. As a CDPE, we will not merely assist you in selling your property, we do our best to make the transition as easy as possible.