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Simply Online obo Pather & Pather Attorneys, Umhlanga KZN: Repossessed houses: Everything savvy buyers need to know

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Properties can be expensive investments, and repossessed homes provide an opportunity to purchase a home at a favourable price.


Article summary

  • When a homeowner defaults on their home loan, the home loan is cancelled and the house is repossessed by the bank.
  • Repossessed homes can be purchased at favourable prices, as the bank is looking to offload the home and recoup its cost.
  • Those who intend to purchase a repossessed home need to take a few factors into account, such as that the house might be occupied by tenants, or may have been empty for a long time and thus fallen into disrepair.


Properties can be expensive investments, so any opportunity to get a bargain is one you should consider taking. Repossessed houses are an example, and here’s what you should look out for when planning to acquire one.


What is a repossessed house?

A house that has been “repossessed” by the bank after the owner defaulted on their home loan, to the extent that their home loan has to be cancelled. A sad occurrence, but the home cannot remain in the bank’s possession forever, and for homebuyers, this turn of events creates an opportunity.


What happens to a repossessed house?

There are three phases during which the house can be purchased:

Distressed sale: The borrower attempts to sell the property before the bank reclaims it.

Sale in Execution: The borrower is unable to offload the home, so the bank takes possession and attempts to auction it off.

Property in Possession: If the bank’s price is not met, the bank buys back the property and it becomes a Property in Possession.


Advantages of buying a repossessed home

The benefits of purchasing repossessed homes include:

  • No transfer duty.
  • The bank is attempting to recoup its costs, and is thus likely to let go of the property for a favourable price. Home loans may be more easily granted, including 100% home loans.


What to look out for when buying a repossessed home

Buying a repossessed home does require some additional scrutiny from the buyer, as there are a few potential obstacles, and some elements that need to be taken into account.


Repairs and maintenance

Since the previous borrower was unable to keep up with their monthly repayments, there’s a good chance they were unable to keep up with maintenance costs as well. Furthermore, a repossessed home may have been empty for a while, increasing its chances of having fallen into disrepair.

So there may be a need to fix it up, and possibly for some renovations. While at first this may be viewed as additional work, it can also be seen as an opportunity to reforge the home in your image and potentially raise its value.


Potential vandalism

Empty houses can be a target for vandalism. So bear in mind you may need to replace parts of the house that have been damaged or even removed.


The house may still be occupied

If the house is occupied by a tenant, this introduces some complications. Tenants are protected by the law for the term of their lease agreement, and it’s not so easy to just evict them. You will need to get advice from an attorney on the correct legal process to follow in this situation.


You may not get a chance to inspect the home

Home inspections are a critical part of the home buying process, but if there are tenants occupying the repossessed house, you may not have a chance to conduct one. Repossessed properties are usually sold “as is”, so you may only have an opportunity to call in the professionals once you have possession of the home.


Municipal services and utilities

Hopefully, the bank will have kept up to date with municipal and utility bills, but there may be a pile of bills to pay when you take over the house, to the point that you may not have some services available when you first move in. This is something you should prepare yourself for.


Buying a home at a bargain price

For all the additional costs and time, buying a repossessed house provides the opportunity to acquire a home at affordable prices, and with a higher chance of getting the home loan approved.

If you decide to go ahead, bear in mind that ooba Home Loans, South Africa’s leading home loan comparison service, provides a range of tools that can make the home-buying process easier. Start with their Bond Calculator, then use the ooba Home Loans Bond Indicator to determine what you can afford. Finally, when you’re ready, you can apply for a home loan.


*Article sourced from Ooba*


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