Definition
A bank repossessed property is a canceled home loan agreement as a result of the borrower defaulting on agreed installments. Legal action is instituted by the bank's attorneys and a judgment is obtained against the defaulter from the High Court. The property is then attached and the Sheriff then sells the property at a sale in execution. If the bank’s reserve price is not achieved at the auction, the property is bought into possession. (If you want to learn more about this also Google REO - Real Estate Owned, which is the American term for this property class.)
It is an ideal time for those looking for a home to investigate this source of properties for sale. There is an oversupply of houses for sale in South Africa and it is a very good idea to if properties in your area of choice is on the banks' PIP lists. The media can sometimes be a bit misleading with reports of 500 homes on a bank's PIP list, this means there are 500 properties in the whole of South Africa, which often means not one in your area of choice.
Advantages of buying a bank repossessed home
1. No transfer duty is payable by the purchaser, if you are a non-VAT vendor. The purchaser does have to pay the transfer costs also known as conveyancing fees and the bond registration costs.
2. Property rates and taxes (including all arrear amounts in this regard) will be paid by the bank in question until the date of registration. (Properties bought on Auction - purchaser "buys" all arrear levies, rates & taxes).
Disadvantages of buying a bank repossessed home
1. All properties are sold "voetstoots” and the banks will not undertake any repairs.
2. The Electrical Compliance Certificate (ECC) is to be obtained by the purchaser and costs of repairs will be at the purchasers expense.
3. The banks do not guarantee vacant occupation of the properties being sold, and purchasers will have to obtain vacant occupation at their own cost. In my opinion, walk away if the property is occupied, in South Africa we have something called the PIE Act (PREVENTION OF ILLEGAL EVICTION FROM AND UNLAWFUL OCCUPATION OF LAND ACT) which has cost many property investors dearly - please consult your estate agent and/or attorney before taking this type of risk.
1. Complete the specific bank's offer to purchase (available from their websites).
2. Attach all the relevant information to the offer, copies of ID, payslips, bank statements and proof of residence.
3. If your offer is not a cash offer you will be able to apply for a bond from the relevant bank. Remember you still have to have the 10% to 15% deposit and you will have to be able to cover all legal costs and the bank will expect you to produce proof of these funds.
FNB and Alliance Auction Group have started a clever initiative called Quicksell Properties where FNB is still prepared to give the purchaser 100% loans for a list of properties on their PIP list. But terms and conditions apply, I can't find any reference of these terms and conditions on either website and so I would advise you to ask for a copy of these terms and conditions before committing to anything.
Warning
You are advised to consult the relevant Deeds Registry Office for accurate information pertaining to a particular property, such as size, endorsements, servitude etc. The Bank will not be liable for any losses of whatsoever nature incurred, as a direct or indirect result of the use of the information on this list.
All users of these list do so at their own risk!
Please take heed of this warning and ask your estate agent and/or attorney to help you before taking the risks involved in buying this kind of property.
I do have copies of the latest PIP Lists for the banks and will be happy to send them to you, just let me know.
