It is an
unfortunate commentary, but when economic activity declines and housing
activity decreases more real property enter the foreclosure process.
interest rates and creative financing arrangements also are
estate industry refers to these properties as “Distressed” and this
include properties being sold as a result of a divorce,
urgent Emigration or
even death. When homeowners find themselves in these situations they
that there is no escape and they are trapped.
the bulk of this article deals with financial pressure, we are through
experience well equipped to assist you in a forced quick sale
environment - no matter what the circumstances
NOT ALONE The first
step in any situation of a forced and urgent sale, is to realise that
not alone. There are others who are and have gone through similar
not allow yourself to be overcome by embarrassment or shame because of
to adopt a positive attitude and a four step approach ;
of the situation
many years of experience of dealing with a variety of situations as
well as being a Certified Distressed Property Expert (CDPE), and am
equipped to assist you, the homeowner, in handling your current
understanding and compassion. It is often at times such as distressed
that we are driven by emotion and it is best to have a professional at
side that cares enough to act in your best interests.
If it is a
quick sale you need, we are your best solution – but more than
When prices are rapidly
accelerating during a real estate "bonanza",
many people go to any lengths available to get into the market through
investments in vacation homes, rental housing and "trading up" to
more expensive properties. In some cases, they also take out second and
bond to make desired improvements. Many
buyers anticipate that interest rates will drop and home prices will
to escalate. Neither may occur, and borrowers may be faced with large
becoming due. When payments cannot be met, the foreclosure process
looms on the
In the foreclosure
process, one thing should be kept in mind: as a general
rule, a lender would rather receive payments than receive a home due to
foreclosure. Lenders are not in the business of selling real estate and
even more so than before, often try to accommodate property owners who
having payment problems. The best plan is to contact the lender before
problems arise. If monthly payments are too hefty, it may be that a
be able to make some alternative payment arrangements until the owner's
financial situation improves.
Let's say, however, that
a property owner has missed payments and has not made
any alternate arrangements with the lender. The bank has by now already
out notices and a final notice. In this case, the lender may decide to
the foreclosure process. Under such circumstances, the lender, whether
savings and loan or private party, will approach their lawyers to send
summons to appear in court on the matter. This summons must be
hand, by the sheriff of the court, to your physical address. You DO NOT
receive it personally.
under most circumstances, can require full payment on the entire
loan, not only on the outstanding balance, as the only way to cure the
court, the lender will request of the court to grant judgement that you
borrower be found guilty of non payment and that the property be
If you think the bank is being unreasonable, and that repossession is
decision to take, you are entitled to appear in court, with or without
representation and to state your case. Our new Credit Act is a lot more
understanding of buyers and the magistrate may well judge in your
repossession not be granted.
ACTION CRITICALTop It is
however critical, that any borrower, take action well before the matter
the courts. DO NOT think the problem will go away of you ignore it.
sincerely believe that you only have a short term problem and that you
able to correct the situation in the short term, then communicate this
lender. Preferably in writing and where possible, with evidence of how
address the problem.
aren't just happening to people who over-leveraged themselves and got
risky loans. They are happening to homeowners who are getting divorced,
health issues, needing to relocate for a job, have been retrenched,
businesses and numerous other reasons. The bank, unless you inform them
unique circumstances, will treat you as just another non-payer.
of how you may end up falling behind on your mortgage, knowing what to
is critically important.
A lot of the news media
are talking about the first thing you need to do is
contact your lender. However, if homeowners who are facing foreclosures
their lender first, the first person they interact with is the customer
agent, who may threaten them and tell them 'We're going to foreclose on
home right away' and scare them into not taking action. If they get to
mitigation person and they are talking to them, they may agree to a
that they cannot afford just to get the phone calls to stop. However,
agree to a workout they cannot afford and they miss a payment, the
have essentially lied to their loan agency. And that's not something
well as providing them with ammunition in court.
Do not panic about your
People need to back up,
really stop panicking. They need to look at their
finances realistically, look at their income, look at their expenses,
liquid cash and prepare a proper budget looking forward. This is also
to brutally assess what expenses can be cut. You will not get sympathy
paying your bond, while you still have for instance an active Golf Club
subscription and DSTV running.
have honestly assesses your situation and know exactly what you can
certainty, then call your lender with that information so that they can
something that's really going to help you and not break you totally
What to say to lenders
If you have gone through
the steps of understanding what your deadlines are and
then facing your finances and you still see that you're short, that's
do need to communicate with your lender and say, 'I need to work out
agreement with you because right now I don't have it.'"
How receptive are
lenders when homeowners say they can't pay their bond?
Times have changed and
banks have generally awoken to the reality of economic
swings and therefore circumstances. What people are finding is that
willing to work with them. It will take a whole lot of persistence on
of homeowners. They really need to make sure that they're not
the conversation they need to have with their lender. But they need to
and say, 'I am not going to be able to make this. What can we do to
payment, lessen the payment or modify the payment until I get back on
have quick sale options, where you commit to selling your property as
as possible and settling them. They will then suspend all legal action,
as assist in varying degrees on costs etc. As mentioned previously, they
do not want
to become property owners – they would much rather stick to their
lending money and getting payment.
Top There are
a whole lot of implications to your various options and we will be happy
provide you with further assistance on these if you require it, but
briefly as follows ;
Opt for your Bank's
Urgent Sale Option.
All the major banks now offer special concessions to clients who face
financial difficulties. The benefits vary from bank to bank but
essentially they are as follows : 1) The bank will write
certain portion of your debt if sold below the amount outstanding. This
means that If you still owe R100 000 for instance on your bank account
you could sell it for R90 000 and have no balance outstanding - and no
judgement record agaist your name. 2) As oon as you enter
the Urgent Sale agreement, all legal proceedings are ceased against you 3) The bank offers 100%
to approved purchasers - making it easier to find a buyer. 4) The bank will offer
the buyer up to 50% discount on transfer and bond costs 5) Any amounts still
outstanding after the sale can be paid off over up to ten years - interest free.
this means you could well get out of a very tough position without
having any judgments against you - allowing you to re-establish
yourself so as to purchase again one day.
If you would like to
know more about the different options available why not contact us today. Go under
Debt Review. A Professional Debt Counsellor will review your situation
you, submit a proposed payment plan to all creditors and apply to court
this proposal granted. Once you have applied for this process, all
must cease legal proceedings against you and participate in this
bank also cannot repossess your house and must accept the payment offer
by the court. This is obviously the first choice for the homeowner
Go under Administration.
The process is very similar to that of debt review,
but is viewed as a more permanent measure. Debt Review assumes you are
temporary crisis and that you can get out of the situation.
however assumes that the situation will not be remedied in the short
makes longer term settlement arrangements with your creditors. Your
will however be repossessed to attempt to settle the debt. You also,
incur any new debt while under administration.
Liquidation. This is the last choice step you would take, if there
simply is no
light at the end of the tunnel. You are so far into debt, you will
able to recover. All your assets are taken, and all your debt written
off. In other
words, you are bankrupt. Bear in mind that if you apply for voluntary
liquidation, your creditors can appeal against it on the grounds that
pay the debt off over time. Remember that bankruptcy leaves a big
on your name and you cannot enter into debt for many years thereafter.
Homeowners should also
look for other sources of money. Think outside the box
to help come up with money - be creative!
A lot of people are
taking in boarders and renting out rooms. Some people are
renting out their entire house and they are staying with family so that
can make the mortgage payment. These are all things that homeowners
need to do
- think a little bit outside the box when it comes to a solution.
There are plenty of
other alternatives, and people just need to look for them
and apply them as quickly as possible. That hobby you have, could be an
to make money by selling the products at a beachfront stall. Are there
time jobs available?
Looking for solutions to
an emotionally and financially draining situation such
as a foreclosure is fatiguing and frustrating. However, if you realize
are options, you can begin to build momentum to rectify your situation.
focus on the downside, accept the challenge and make it exciting.
critical to consult with experts on this matter, to be open
about your financial dilemma, and to seek help immediately. We can, with
CDPE agent experience, work alongside you and your
bank to look at sale options, if necessary, or rent
it out to help you pay your mortgage. We can also provide basic advice
on what solutions your bank offers, other alternatives
or refer you to professional assistance.
times we have been able to work together with a client in finding
solutions - which meant they did not have to sell their home, holding
on to their largst asset. Sometimes even just long enough to let a sale
take price without pressure, which helps in obtaining full market value.
do it alone can be a painfully disastrous experience - seek the help
and feel free to contact us.
For a legal understanding of
Voetstoots go here
Back to Sellers Section For Finance issues go here, or check out the Legal