The risks and rewards of repossessed property sales
Property Investment
BUYING a repossessed home can be tempting for bargain hunters, but property experts warn that the risks are often as big as the savings.
Image: Matt Rourke/AP
BUYING a repossessed home can be tempting for bargain hunters, but property experts warn that the risks are often as big as the savings.
According to RE/MAX Southern Africa, repossessed properties form part of a wider category known as distressed sales. These include bank-mandated sales, sales in execution or public auctions, and properties in possession.
Each comes with its advantages, drawbacks, and costs that buyers must carefully weigh before signing on the dotted line.
“RE/MAX agents who specialise in distressed sales are known as our Certified Distressed Property Advisors. They are trained to deal with these delicate and highly emotionally charged transactions and are well placed to help,” according to Adrian Goslett, regional director and chief executive of RE/MAX Southern Africa. “If you are considering purchasing a repossessed property or perhaps find yourself in over your head with your home loan repayments, reach out to your nearest RE/MAX office for support.”
Bank-mandated sales are voluntary and generally offer a more transparent process. A property condition report, signed by both buyer and seller, ensures that all parties know the state of the property. The seller is also liable for settling arrears on rates, electricity, water, and levies.
However, buyers should remember that these sales are often concluded on a “voetstoots” basis — meaning the property is sold “as is”. While offers can be rejected by the seller, buyers may still opt to conduct their own inspection, but renovations can only be made once the transfer is officially registered.
Public auctions, or sales in execution, are involuntary and typically allow buyers to secure properties below market value, with the added advantage of avoiding transfer duty.
But the risks are higher. Properties are sold voetstoots and often without inspection rights. Buyers may inherit outstanding debts, face legal disputes, or deal with the messy and costly process of evicting occupants.
The financial burden can also add up quickly. Costs include an upfront deposit with the balance due within 21–30 days, sheriff’s fees or commission of 6–10% plus VAT, and auction registration fees of around R25 000 (refundable if no purchase is made). On top of this, buyers could face outstanding rates and utilities, eviction proceedings, and renovation costs.
Properties in possession — more commonly called repossessed homes — are often available below market value and also come without transfer duty.
Like auctions, however, these sales are riddled with uncertainties. Properties are sold voetstoots, usually without prior inspection, and buyers could be responsible for arrears, legal wrangles, delayed access, and evictions. Additional expenses may include conveyancing fees, outstanding levies, utilities, and repairs.
“With all the unknowns and uncertainties, it is incredibly important to do your homework before making an offer on these kinds of property sales,” Goslett cautions. “It is also important to work through a reputable professional who can guide you through the process.”