What to do when your bond is crippling you
The reality in today’s economic environment, where affordability is currently under pressure, is that financially distressed property owners are everywhere. These are owners who may find that their outstanding bond is actually higher than the value of their property, their rates may be too far gone in arrears, or perhaps they find that they simply cannot keep up with the property’s maintenance. These properties can range anywhere from R300 000 to R12 million. Most of these people are unaware that the Big Four Banks (Standard Bank, Absa, FNB and Nedbank), working together with selected real estate agencies, offer bank assisted sales solutions that can actually change their lives and it’s all good news.
The successful examples are endless.
What is a bank assisted sale?
So what is a bank assisted sale? It is a mutually beneficial programme entered into between a seller and the bank, facilitated by a bank-appointed agent, to provide financial assistance to a seller. Essentially, the seller, who is still the owner of the property, joins the programme voluntarily and is respected as such, up until the end of the process. Financial assistance provided by the bank includes the full or partial write-off of home loan shortfalls, payment of arrears rates and taxes, levies, municipal accounts and any other miscellaneous costs associated with the transfer if necessary. Thereafter, balances are allowed to be paid off, interest-free, for up to 10 years.
How to join the programme
An owner can contact the bank and request to join the programme, and the bank will then allocate them an agent from their panel of estate agencies. Alternatively, an agent whose agency is already associated with the programme can approach the bank on a seller’s behalf. The bank will instruct that an independent valuation is done to establish the market value and subsequent asking price of the property. The seller signs a mandate with the bank, who also formally appoints the agent to market the property, on condition that all other existing mandates entered into, in the owner’s personal capacity are cancelled. In addition to the asking price, the mandate includes agreement on commission and the general shortfall assistance provided by the bank.
Banks do not deal with agents directly. Each estate agency on the bank’s panel must have a dedicated Bank Assisted Sales division within their company that consists of an administrative team who facilitates these sales and handles all liaison between banks and agents. Manager of Pam Golding Properties’ Bank Assisted Sales division, Tania Smit, says that the company offers a lot of support to agents working on bank assisted sales.
“Often, we are able to look into a property’s previous offers to see what is needed by the bank to allow the sale to go through, she says.
If you have already signed an offer and realise that your transfer cannot go through, there is still a chance that the bank will assist. Speak to your agent or your bank’s assisted sale division. You may just need to change conveyancers and amend commission according to the bank’s rates.
Marketing, offers and the sale
The best part of a bank assisted sale is that it is not treated as one. Once listed, it’s business as usual for the agent – who is allowed to market the property for a 60 – 90 day period – even the offer to purchase is completed on the estate agency’s documentation.
It’s important to remember that because it is a voluntary process, the bank will never reduce a listing price unless the seller agrees, says Smit. And if you have an offer, the bank will wait for the seller to accept it, she says.
Two small differences are that offers to purchase that are ‘subject to sale’ are not accepted by bank assisted sales programmes. Also, the seller doesn’t appoint the transferring attorney; the bank will use their own panel to keep costs down.
We know what you’re thinking. So what’s the bottom line? Commission, paid to agents, is set by the individual banks at pre-agreed reduced rates which are paid by the seller. But it’s still a win-win for both seller and agent with additional incentives being paid by most banks to motivate agents.
Transfer, arrears and shortfalls
Once again, it’s business as usual with regards to the transfer process, but (and this is a good ‘but’) this is where the real benefit of a bank assisted sale kicks in. If there is a difference between the outstanding debt to the bank and the proceeds of the sale, this will be added to any other financial assistance given by the bank.
Here’s the clanger: the bank will actually write-off anywhere between 10% and 50% of this amount, depending on the bank and the seller’s arrears status.
“Working on a bank assisted sale is economically viable for an agent, but it is also a way of giving back. It is very gratifying to make such a difference in people’s lives,” says Smit.
Things to remember
- It’s voluntary. The seller is allowed to withdraw from the programme at any time without penalty. However, the benefits will be lost and unfortunately, the seller will not be allowed to re-join the programme again.
- The appointed agent acts on behalf of the bank, in terms of the bank’s mandate with the seller.
- As the seller signed a mandate with the bank, the agent does not sign another mandate with the bank.
- Sellers who decline to accept asking-price offers, as agreed in the mandate, will not be allowed to stay on the programme and forego the bank’s hearty benefits.
If your bond repayments are in arrears and you would like to sell your property anywhere in South Africa, consider Pam Golding Properties Bank Assisted Sales process to guide you. Contact firstname.lastname@example.org or 082 378 7990.