Repossessed SA houses and real estate is becoming increasingly available these days and banks repossess a large number of homes and property as a result of people not able to afford to keep up with their monthly bond repayments.
South Africa is not the only country in the world where people can buy homes that have been taken by the bank in order to cover financial loss because of non-payment. Bargains can often be picked up by investors or anyone looking for a good deal on properties and various repo auctions are held throughout the country on a regular basis.
If you are in the market for a repossessed house then know that these bargains are not on the market for long so you have to be quick.
Also, be prepared to have to spend some extra money on renovations and repairs to a home that has been taken back by the bank. In many cases the previous owner/s will have neglected the maintenance on a property due to financial problems so work may need to be carried out in order to get a building back up to scratch again.
What a repossessed property is
When an individual purchases a property, they usually have to get financing from a financial service provider. If, for some reason, they cannot make their payments or they begin to get overwhelmed by debt, the financial service provider will repossess the
The financial service provider does this to make up the money that they lost from the individual’s non-payment. The financial service provider will be keen to get rid of the property as quickly as possible and will usually offer it at a very low price to get it to move.
This type of property is usually sold through an auction, either by the financial service provider themselves or by an auctioneering house that they outsource to. These sales are open to the public and there is the possibility of finding some really great bargains.
Advantages to buying a repossessed property
These types of properties are usually incredibly affordable. Because the banks want to get rid of the properties as quickly as possible, they drop the prices below the average market rate.
Disadvantages to buying a repossessed property
You will be buying the property ‘as is’.
The financial service provider or auctioneer usually sells the properties as they are. This means that they will not make any improvements or repairs to anything in or on the home.
If you buy a repossessed home with peeling paint, a broken plumbing system and a faulty geyser, you will have to fix and maintain it yourself.
You may have to deal with irate previous owners or tenants who refuse to leave.
There have been occurrences of previous owners or tenants becoming angry and upset at the repossession process and refusing to leave their homes even if they have been served with an eviction notice.
You might have to deal with a situation like this when you purchase a repossessed property.
Three ways to purchase repossessed houses and real estate in South Africa
Option one: Go through your financial service provider
Most financial service providers repossess properties regularly. Some banks sell their own repossessed properties themselves while others outsource theirs.
It is a good idea to contact your financial service provider and find out if they have any repossessed properties for sale in the area you are looking to buy in.
Option two: Contact a reputable auctioneer
You can also look at property auctioneering companies and find out what they have on offer at any given time and in any area.
Option three: Contact individuals who need to sell before their property is repossessed
This option may be your most affordable, but it is more difficult to get right and it can be a bit of a risk.
Many people, when they realise that they are in big trouble with their financial situations, will try to sell their properties as quickly as possible in order to get some cash so that they can avoid being repossessed.
Because these individuals are so desperate to get out with at least some cash, they will accept very low offers. However, finding people in this situation can be difficult.
What to keep in mind when purchasing a repossessed property
Do a thorough inspection
Make sure that you check EVERYTHING before you sign anything or pay for anything. If the basic structure of the house is flawed you will be wasting your money buying it.
Take an expert with you
If you do not know how to spot signs of wood lice and other flaws, take an expert with you to help you out.
Make sure you trust the seller
It is important that you do not buy the property from someone who is not trustworthy or you may find hidden flaws.
There are real estate investors around that specialise in sourcing below market value property deals which often come in the form of homes that a financial institute has had to repossess. These investors will deal directly with motivated sellers and negotiate a purchase price with the seller instead of going through a South African estate agent.
An investor will make some commission themselves if they then sell to the general public but it would be a fraction of the commission that an estate agent earns when selling repossessed houses and real estate in SA.