Buying property from bank sales

Private Property South Africa
Private Property Reporter

Simon Bray tells you how to go about buying property from a bank sale.

Reporter: Firstly, what is bank property?

Simon Bray: Really, it refers to all of the property that may be in possession of the bank. Most people have got a home loan on the property that they own and, unfortunately, some people can't service that home loan debt over a period of time. In that case, the bank is allowed to repossess the home or sell the home to defray the home loan expenses that are outstanding. That's really what bank properties refer to. On our site, we're lucky enough to have hundreds of bank properties come onto the market every month, and we market those and advertise those to the public.

Why would you say a buyer should consider a bank property?

Simon Bray: The great thing about bank properties is they're sometimes a little bit lower than market, and the banks offer great assistance on those types of properties. So you're getting a good deal on the one hand. On the other, you're getting assistance on things like transfer costs and home loan finance. And that's what makes bank properties particularly attractive.

And when it comes to the Private Property website, there are different types of bank properties. Where do you start?

It can be a little bit daunting, a little bit confusing when you first look at it. But quite simply, you get two major types of bank property. The one is SIE - or Sale In Execution - and the other is Properties in Possession. So quite simply what happens is, if somebody can't pay their home loan, then the bank is forced to take that to auction as a sort of matter of last resort. And it will then go to the sheriff of the court, and the sheriff of the court will auction it off. And we advertise those auctions on the site, and you can find out where they're going to be happening and when they're going to be happening. You'll arrive at the auction, somebody will bid for it. If the bid isn't what the bank is prepared to sell the property at, then the bank can buy the property back in a way from itself, and that's what you call a Property in Possession. So now, the bank owns it on their book of properties, and then they'll look to market those, because they'll want to get rid of those over a period of time, as well.

Now if you do go to an auction for yourself, I can imagine it must be quite an intimidating process. What do you do in that instance?

I'd love South Africans to get more comfortable with the concept of an auction. Overseas, auctions are actually the main way property trades hands. So it's only really in South Africa that we're daunted by the prospect of going to an auction. But quite simply, if you go to an auction or if you're looking to buy auction property, it's worth visiting a few auctions before and just kind of observing what happens, and you'll notice very quickly that it isn't as terrifying a prospect as you think it might be. Simple things, you'll register for the auction. You'll put down a deposit. You need to be aware that you're paying a commission to the sheriff if you do win the bid on the property, and then it's a normal property transaction after that. You can find finance and you can sign a sale agreement.

And so you actually have to do your research when you do a property auction. But what are some of the things for a first time buyer doing that, what must they look out for?

I think the most important thing is the property is ultimately going to be your property, so you can't shortcut the process of understanding what the market value is of the property, so you don't over bid on the price or the value of the property. Make sure that you've visited the property because often, auctions are sold voetstoots, so as is, so make sure you've visited it and you understand what all the potential pitfalls of the property might be. Those are very important. And obviously, don't bid on anything you can't get finance for. So understand your own affordability position and understand what you can afford.

When I think of an auction I think quite a rushed process, is it that rushed or do you have time to go and visit the property, do all the necessary inspections before you decide to buy?

Auctions are advertised on Private Property so you'll know long before the time when the auction is actually going to take place. It gives you the opportunity to view the description, the pictures on the website, organise a visit and go and view the property. It's a normal property transaction right up until the time you go to auction. And then at auction, if you arrive early, then it's not a rush.


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