Are you in the market for a new home in the Western Cape? If so, have you thought about investing in a repossessed property? In this economy, the number of repossessions up for grabs in Cape Town continues to grow, giving you more choices when taking advantage of reclaimed property deals.
Definition: A repossessed property is one that has been reclaimed by the bank or other financial lending institution as the previous owner defaulted on loan repayments. The lender can then cancel the home loan and reclaim the property back into their possession.
Why you save money when you buy a repossession
Reclaimed properties often come with a cheaper overall price tag for a number of reasons:
- The bank (or other lender) is more concerned with recovering any losses than making a profit. This means that if most of the mortgage had already been paid by the previous owner, the property will be put on the market for a very low price.
- It’s easier to get a home loan for a repossessed property as the bank selling the property would like to sell it off as soon as possible; this means speeding up the process through which home loans are approved.
- There is usually no transfer duty on the property (depending on the auction terms), saving you a substantial amount of money.
How to find a repossessed property
To start researching the repossessed property market in Cape Town, visit the websites of the four main banks (Absa, Nedbank, Standard Bank and FNB) and browse the Cape Town properties listed for sale.
Other websites also host these listings on the banks’ behalf, and a simple Google search will reveal multiple repossessed properties for sale. A good place to start online is on the My Roof website (www.myroof.co.za), where you can choose the repossessed properties category and refine your search criteria to include: “type of property” and other refinements.
If you are looking for a property in a particular area in Cape Town, you can refine your search according to those criteria.
When looking to buy
Approach repossessed property shopping with an open mind – properties are usually sold voetstoets (as is), and some may require some repair work, particularly if the owners were in too much debt to keep the house in a well-maintained condition.
Assess the work that needs to be done against the price of the house. You don’t necessarily want to save a lot of money on the house, but then spend all the savings incurred on costly and lengthy repairs.
For this reason, you should inspect the property before placing an offer. Since the property has likely been empty for some time, it can also be subject to vandalism and overall neglect. You need to have a good idea of the work involved refurbishing the place before you can make an offer on its worth.
Even if you are looking for a more upmarket property, don’t rule out repossessions, as it’s not only lower and middle-income people that find themselves in debt. You would be surprised as to how many upmarket houses in Cape Town are listed for sale.
When putting up an offer for a property, aim low. Depending on how quickly the bank would like the property sold, your offer could be accepted. If it’s rejected, simply revise the price and try again.
Before buying, ensure that you will not be liable for any outstanding electricity bills, rates, and taxes. Because the previous owner defaulted on the property loan payment, they very well may have neglected to pay these other rates to and you don’t want the nasty surprise of having to cough up for their non-payment.
Houses today are expensive, with even a pokey little place in Clifton or Camps Bay reaching above the R10 million mark. For this reason, buying repossessed properties can save you a lot of money and decrease the bond payments you will have monthly.
Although some of these properties may require a little fixing up, this also gives you the opportunity to make the home your own in the refurbishment process.