With unemployment rising to 32.6% in the first quarter of 2021, one can expect that hard times are ahead for many South African households. In some areas, the effect of this can already be felt within the Distressed Property market.
Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, explains that the term distressed properties refers to homes that have been put onto the market because the homeowner has fallen into financial difficulties and needs to be relieved from his/her debt.
“Financial institutions offer their clients the opportunity to sell their homes through their distressed sales programs before they fall hopelessly behind on repayments and the bank is forced into repossessing the home. Naturally, we expected that the number of these kinds of sales would increase following the lockdown. But, as yet, our Distressed Property division reports that the market as a whole has not experienced significant changes in activity, although certain nodes have experienced more sales than others,” he explains.
Riana Burger, Certified Distressed Property Advisor at RE/MAX Masters, says that she has noticed an increase in these kinds of sales since the pandemic first started last year. “Last year, I concluded only one distressed property sale. This year I have already sold five distressed properties. I have been involved with distressed property sales for a number of years, but this year is the first time I have had sheriffs coming to deliver notices at three of these properties. This has never happened before,” she explains.
She predicts that there will be an increase in distressed property sales in time to come. “If you only look at the hospitality, tourism, and events sector – the outcome for those working in these industries has been devastating,” she states.
Her predictions are similar to those of fellow Distressed Property Advisor, Jacques du Preez of RE/MAX Jowic. In his experience, there have actually been fewer distressed property sales than before. “Banks are trying to be accommodating at this stage and are not putting as much pressure on defaulting homeowners as they were before the pandemic. But, this will not last forever. Sometime either at the end of this year or sometime next year, I do predict that there will be more properties coming onto distressed property market.”
Rather than continue to battle against rising levels of debt, du Preez encourages homeowners to make use of the distressed property programs if it is offered to them by their bank.
“These programmes offer the best possible solution to homeowners who are struggling. If the agents get offers for under 80% asking price, then the seller is not forced to sell. The distressed property programs also incentivise the agents to get the full asking price within the allocated time frame, otherwise their commission will be penalised,” he explains.
In Burger’s experience, she has found that her clients have been more open to the idea of selling through the distressed programs. “Since COVID, maintaining a healthy lifestyle seems to become more prominent and people are very cautious to prevent financial loss. I find that they are then more positive towards the idea of selling through the bank’s distressed property sales programmes as they seem to experience a need to reduce the stressors in their lives. They also find the lowered commission rate on these kinds of deals more attractive.”
It can be incredibly challenging to make the decision to sell a home through a bank’s Distressed Sales Program, but these programs offer struggling homeowners an opportunity for a fresh start.
“We train our agents through the RE/MAX Certified Distressed Property Advisor (CDPA) program to learn how to deal with these delicate and highly emotionally-charged transactions. These Certified Distressed Property Advisors are best equipped to assist sellers in reducing their debt to zero – or as close to it as possible – by providing the best possible service within these challenging circumstances. Those who are struggling to keep up with their bond repayment during these challenging times should speak to their financial institution or arrange a free consultation with one of our Certified Distressed Property Advisors,” Goslett concludes.
