Top 10 Tips for Buying A Bank Repossessed Property

Property Bank Repossessed
Property repossessed by the Bank is an attractive buy!

One of the advantages for buyers of property in the current economic climate in South Africa is the increased availability of Bank Repossessed homes on the market.

When borrowers default on the payment terms of the mortgage loan, eventually this will lead to legal action by attorneys instructed by the mortgage holder.

A judgement is obtained in the High Court and the property is then attached and sold by the Sheriff of the High Court at a sale in execution. If the auction fails to achieve the bank’s reserve price, then the property will be bought by the Bank and placed on the market again. This is called a Property in Possession (PIP).

Another source of PIP’s comes from home owners that are declared insolvent. Here a trustee will be appointed, who in turn will appoint estate agents to market the property. If it does not sell, a public auction will be arranged through a qualified auctioneer. Once again, if the property does not fetch a suitable price, the Bank may buy it in and the property will be placed on the market by the Bank.

On average Bank Repossessed properties sell at a huge discount and since banks are keen to find buyers they are often ready to relax their lending criteria, making home loans in these cases a little more accessible. This may include reduced, or even no, home loan registration costs.

Other advantages are that the Transfer process is often much quicker, leaving more time to do any renovations before actually moving in. Also, property rates and taxes (including arrear amounts) will be paid by the seller (the Bank) up until date of registration.

Here are the Top 10 Tips for Buying a Bank Repossessed Property:

1. Make sure you have a plan:
What will you do with your property? Will it be a buy-to-rent purchase, will it be a holiday home or will you live in it.

2. Get a “pre-approval” if you intend to buy with a mortgage bond:
Chances are, if you like the property so will many other potential purchasers. You do not want to lose out to another buyer while you are waiting for your home loan approval. Have your pre-approval in hand when you make that offer to the bank. It will greatly speed up the process of having your offer accepted.

3. Compare the price of similar sold homes to the price of the Bank Repo:
You need to compare “apples to apples” to make sure that your intended purchase is good value. An experienced agent can help you with this by preparing a Comparative Market Analysis (CMA). By accessing Deeds Office records for the selling prices of properties recently sold it’s possible to get an accurate assessment of what your target property’s selling price should be.

4. Know the hidden costs of the property:
Bank Repossessed properties are sold voetstoots (as is) and the bank will not undertake any repairs. Often the property has been stripped of fixtures and fittings and the gutters and down-pipes are missing, for example. Typically the property has been through an extended period of neglect and essential repairs and maintenance have not been taken care of by the previous owners.

Electrical, Plumbing and Gas Installation compliance certificates must be obtained by the purchaser as part of the transfer process. If the property is in a mess the costs of bringing these areas up to scratch could be significant.

5. Get a home inspection:
A thorough inspection for defects carried out by professionals can go a long way to identify all defects and potential defects in the property. Consider investing in a Professional Home Inspection before you make a buying decision.

6. Investigate if the property is occupied:
It can happen that there are occupants living on the property at the time of sale. This could be the previous owners that have not yet moved, tenants that are still there or it may be an illegal occupation. Whatever the case, this automatically becomes the buyer’s problem at the time of sale and the costs of an eviction and relocation may become the purchaser’s liability.

7. Investigate restrictions on the Title Deed:
Any restriction or servitude on the Title Deed may or may not be mentioned in the information provided and it is therefore advisable to look at the Title Deed before making a decision. If the property is owned by the Bank then the Bank will be in possession of the Title Deed.

8. Consider the location of the property:
This may seem obvious but most people in financial trouble will first have tried to sell the property themselves before the bank foreclosed on them. If the home is badly situated this could be the reason the property did not sell in time to save the situation.

9. Make a good offer:
Once you have decided that the property you are considering is a good buy, know that other people will also come to the same conclusion. There is no point in making a low offer. Ideally you should make an offer that is within 90 – 95% of the Bank’s asking price. You will just lose out, and will keep losing out to other purchasers as long as you keep making offers that are too low.

10. What to do if your offer is turned down:
You could up your offer. However, you might consider it worthwhile to wait 30 days and re-submit your offer. Properties in Possession are expensive to maintain. There may be security guards on the premises and the garden must be maintained, for example. The Bank could become more negotiable with the passage of time.

If there is anything else you would like to add please feel free to do so in the comments.

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89 thoughts on “Top 10 Tips for Buying A Bank Repossessed Property”

  1. Good day,

    I am really interested in buying a place for myself in Pretoria East (Garsfontein, Faerie Glen, Waterkloof, Constantia).

    Can you please advise/assist in giving tips/contacts on how to search/buy Repo houses. I have been keeping a good eye on MyRoof, but I am sure that is not the only website to view repo houses. Can you inform me which website (without registration fee’s) I can keep another eye on?

    I would appreciate your help as I am looking for a good buy which is not too expensive for myself :) as this is my first time buying.

    1. Hi Karin,

      MyRoof is probably one of the best known sources for finding repossessed properties that are for sale. You can also try Googling “repossessed properties south africa” to find quite a few additional resources.

      Best of luck.

  2. Dear John,

    I bought a PIP from a bank auction now the people who stay there refuse to move out. The bank can’t do an eviction because the property is not in the bank’s name. They need to transfer it to banks’ name first but the people who stay there refuse to even open the gate to get the meter readings. The bank lawyer says without those readings nothing can be done and if they don’t want cooperate, there’s nothing they can do.

    What are my options now? Can I cancel the deal and not loose any thing or what advice can you give me?
    Thanks

    1. Hi Elias,

      See answer to your question below:

      “The only way to get unwanted occupants out legally is to apply for an eviction order through the courts.”

      PIP is an acronym for “property in possession” and it means the bank has taken temporary ownership of the property. Until the property is sold, the bank is the owner, despite what you may have been told.

      Your problem might be that the bank’s lawyer is acting for the interests of the seller, the bank. This could be the reason why you are being told nonsense about the cause of the delay.

      There is good reason to consult with an attorney of your own choosing. You could have your documents perused, have your attorney establish the status of your offer and find out whether there is a problem with the transaction.

      Only then will you know how to proceed. Your attorney can help you start eviction proceedings to get rid of your unwanted guests, particularly if it turns out that you are in fact the current owner.

      Good luck.

  3. I bought a house at a bank auction. There are people who are current living there. I went there to check if I can get an electrical certificate of compliance and they didn’t open the gate. Then the lawyer sent a municipal worker to get a meter reading and they didn’t open for him also. They said they will start with eviction. The question is, who pay for all of that?

    1. Hi Elias,

      Unfortunately that will be your problem. As mentioned in the above article, this is one of the potential downsides of buying a repossessed property. The only way to get unwanted occupants out legally is to apply for an eviction order through the courts.

      Good luck.

      1. Hi john
        When I read the condition of sale it says the bank might have one key when they hand over the house and the other problem is it says they will clear all rates and taxes. How will they do it if they them selves can’t get into the property?

        1. Hi Elias,

          ” . . the bank might have one key when they hand over the house”

          It’s your responsibility to sort out any other keys that you may require for the property.

          “. . they will clear all rates and taxes. How will they do it if they themselves can’t get into the property?”

          Fortunately, that’s the bank’s problem, not yours. However, access is not necessary for this. The municipality will provide the conveyancing attorney with a statement of the outstanding amount to be paid by the previous owner.

  4. Hi John,

    Thanks a mil for the information. I have a question – we’re in the process of putting in an OTP for a repo house. The concern is that there are tenants/previous owners (we don’t know because the bank doesn’t know).

    If we give an offer, and they accept it – do we investigate the occupancy details between the bond approval and the registration, or do we have to wait until the bond is registered (and transferred)?

    It feels kinder to give people longer notice, but I don’t want to be in a position where we’re paying a bond as well as our current rent.

    Thanks

    1. Hi Thandi,

      Until you own the property, you can’t take action against the current occupants. However, there’s nothing to stop you from investigating their status now, even before you make the offer. It would definitely be in your interest to do this. If you discover, for example, that it’s the previous owner and that they’ve no intention of moving, you can decide if you are up to the hassle and expense of getting rid of the occupants. At least you could factor this into your offer.

      Best of luck.

  5. We have just purchased a house at the auction and the executor of the estate had asked for the house to be auctioned.

    Now the lady occupying that house claims that she was married to the deceased, but just not legally. Therefore she doesn’t have documentation proving that. She has now taken the executor to court and we are about to register the property in our name.

    What can we do to get her out as she is not the executor and she doesn’t want to move? What can we do as we will soon like to occupy the property?

    1. Hi Shaz,

      Congratulations on making the winning bid.

      It may be that this person is simply playing for time. You would be well advised to consult with an attorney who can help you expedite the matter and, if it proves necessary, start legal proceedings to have the occupant served with an eviction order. Anything else may be a complete waste of your time.

      Good luck.

          1. Hi John

            what happens if the attorneys who are handling the estate say we should first wait for the court to make a ruling before we can get the house transferred in our name? isn’t that unfair to us as they are now holding up the process. I know the occupant only logged the issue now at the courts but what should we do now? wait.

            Regards
            Sharon

  6. Hi John,
    I have been living abroad for about 10 years now and have a good cash lump sum in order to purchase a nice (ish) place,
    If I purchase a bank repo property and there are tenants in there once purchase goes through and deed is in my name.

    1. Could I wait around outside, once they leave to go shopping eg. Couldn’t I legally move in and change the locks on them as they left at their own will ?
    2. Could I bring in some muscle have forcefully remove them ?
    it would then be their word against mine.

    In Europe they evict and send the sheriffs to remove them.
    thanks
    Derek

    1. Hi Derek,

      As tempting as it may be to do this, please don’t even think about it. Both proposals can render you liable to criminal prosecution. Someone could get hurt which would just escalate the potential for serious consequences.

      Perhaps you could try offering an incentive for them to move, such as a cash lump sump, or you could offer to pay their moving costs. This option might cost a fraction of the legal costs of getting an eviction order and eventual removal by the sheriff of the High Court.

      The process of eviction is costly and takes time. However, it’s the only viable option to successfully remove squatters or defaulting tenants. See an attorney.

      Good luck. It’s a good time to be investing in property.

  7. Heita,

    I am planning on making an offer for a insolvent estate for R200.000 and a 10% deposited is required. My questions are as follows; Is the deposit refundable? What are things that I should look out for in terms of the structure and the surroundings? How long after I have bought the property will I be able to sell the property?

    1. “Is the deposit refundable?”

      Usually the deposit is not refundable if you should withdraw after your offer is accepted. If your offer is not accepted you will get it back, less certain costs. For example in the case of an auction, it will be used to cover the auctioneer’s fee.

      “What are things that I should look out for in terms of the structure and the surroundings?”

      The Agreement of Sale will probably contain a voetstoots or ‘as is’ clause. This protects the seller from liability for latent (hidden) and patent (visible) defects in the property. So you should do a careful inspection before you sign.

      “How long after I have bought the property will I be able to sell the property?”

      This really depends on you. Theoretically, you could sell just as soon as transfer of ownership is registered in your name in the Deeds Office. With a normal transaction, usually transfer takes around 2 to 3 months from when the Offer to Purchase is signed by both parties.

      Do bear in mind that for an insolvent estate the process can sometimes take much longer; anything from 6 months to a year or longer is normal. Each case will be different and it all depends on the complexity of the affairs of the insolvent estate. The sale is subject to the approval of the trustee of the insolvent estate and also the Master of the High Court.

  8. Hi,

    I recently bought a house on the sheriffs auction but the place was left unoccupied but furniture and certain personal belongings are still in the house. The place was in a terrible state with dead chickens that the previous tenant left to die without food and water.

    Regards Corne

    1. Hi Corne,

      Hope you got it at a fair price.

      You should make a reasonable attempt to trace the owner of the furniture and personal belongings. You could ask the sheriff for details. Give this person an opportunity to remove same within a reasonable time-frame, say seven days. Then throw it all out with the dead chickens.

      Good luck.

  9. Hi John

    Many thanks and appreciation for this informative ad.

    I bought a repo house from an estate agent and was advised that the bank still has the title deed and advised that by January they would have evicted the occupants. The house is in my name.

    I need advise regarding this matter the occupants are threatening to go to their lawyers, what is the efficient and less costly way of getting them evicted as at the moment I cannot afford R 16,000.00 of lawyer fees to get them evicted?

    Your response will be highly appreciated.

    Many Thanks
    Amanda

    1. Hi Amanda,

      You don’t want to hear this, but there’s no practical way other than the legal route, unfortunately. Only the Sheriff of the Court may be empowered by means of a legally obtained Court Order to forcibly eject occupants who refuse to move. Unfortunately, this is a relatively expensive and time-consuming process.

      You can try approaching them first directly. Perhaps you could offer them an incentive to move, such as a cash lump sum. Or you might offer to pay their moving costs, for example. This may be far cheaper than going to court. You would be well advised to have an attorney handle the negotiation for you.

      Good luck.

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