Is it safe to buy a repossessed house in South Africa? What are the advantages and disadvantages of purchasing a bank repossessed home? We take a look at these issues to help you make a more informed buying decision regarding house repossessions.
Buying property is a big step and a serious decision that will affect you for a very long time. There are different reasons you would want to buy a property. With auctions that have options for houses you can bid on and buy.
So you should choose the way that best suits your needs, financial situation and preferences.
What is a Repossessed House?
When an individual wants to purchase a home they will usually have to apply for financing from a financial service provider in order to afford the property. This lender will want to know two things before they will approve the loan for the property.
- They will want to see that the individual has a regular, steady income. That will cover their essential living costs as well as their monthly loan repayments and interest.
- They will also want to see that the individual has a good credit record. And is a client that represents little to no risk.
Because any individual’s financial situation is unpredictable. And because things can change in a very short amount of time, sometimes the client may not be able to afford to make a payment in full or on time.
When this happens the lender will give the client a warning. If the client does not make good on their payments the bank or financial service provider will repossess their home.
They will usually keep the property for a short holding period. To allow the client a last chance to pay what they owe. But if they cannot make their payments, the financial service provider will then sell the house off to make their money back.
You might like this as well: Bank Repo Homes on Auction
The Advantages of Buying a Repossessed House
There are advantages of buying a repossessed house in South Africa.
Repossessed properties are usually sold at quite low prices. Because the financial service provider is keen to sell them.
In addition, because of the recent financial struggles, the market value on most houses has dropped anyway. Making repossessed houses even more of a bargain.
If you buy repo property directly from the financial service provider you can save thousands on transfer fees.
Bank auctions selling off house repossessions regularly occur in Johannesburg, Pretoria, Durban and Cape Town.
What are the Disadvantages of Buying a Repossessed House?
Just so you understand there are a few disadvantages to buying a house repossession on auction in South Africa.
For instance the bank will usually want to make their money back as quickly as possible. And unlike other property sellers they are not looking to make a profit. So this means that they will not be making any improvements or repairs to the property when they sell it.
The downside to this is that often repossessed homes are usually in a state of disrepair. You may be getting a low price on a property but you will have to understand that the property will come ‘as is’. Therefore any disrepair or maintenance will be yours to fix and finance.
In addition if you have not noticed any one problem or fault in the property until you have already paid for the home you will not be able to hold the financial service provider responsible for it.
The other disadvantage to purchasing a repossessed property is that often the previous owners will not be willing to give up their home. So this means that they may not be happy to simply leave their house and allow the new owner to take possession of it.
Even once you have purchased the home if the individual’s do not wish to leave it you will have a serious legal battle on your hands to try to get them off of your property. This could be difficult and expensive.
Buying Advice when Purchasing Property Repossessions
There are several things to keep in mind when purchasing a repossessed property.
Firstly you should never let yourself be blown away by the cheap price of the property. It may blind you to other factors that could cost you money later on.
If the house does need repairs or maintenance it is a good idea to get a professional in to inspect and give you a quotation.
It might be a good idea to get two professionals to give you two separate quotations. So that you get an idea of what your repairs will cost. You should add this cost to the cost of the house.
You should also add the attorney’s fees for registering the property in your name as well. As the bond registration fees to the total cost so that you know you are looking at the real figure.
The low cost of the property may also make you overlook the area that the house is in.
So it is a good idea to take a few things into account such as:
- What the area is like
- What the crime rate is like
- Whether there are good schools nearby
- Whether other houses in the neighborhood are well looked after or rundown
- And whether the house itself is suitable for you and your family
If, however, you are looking to buy a repossessed property as an investment to rent out or fix up and sell on for a profit, you should pay even more careful consideration to the area.
This may also interest you: Buy Repossessed Houses for Sale in SA
Bank Repossessed House Auctions in South Africa
Some financial service providers handle the auction process themselves. However banks like Absa, FNB, Standard Bank and Nedbank hand the properties over to auctioneering houses and just collect their money.
Most financial service providers will have a list of the properties and other repossessed goods up for auction on their websites. In addition you could also contact them for a list of what is currently available.
To Summarize Whether It’s Safe to Buy a Repossessed House
In summary it is safe to buy a repossessed house in South Africa. As long as you are aware of the few advantages and disadvantages that we mention here you will be fine.
Online auction websites such as this one https://www.property24.com/auctions allow you to view images and see prices of home repossessions online.