Advice to homeowners in financial distress

Private Property South Africa
Private Property Reporter

In the current economic climate, more homeowners are finding themselves in financial distress. Here are some pointers to help homeowners deal with this situation.

The number of property owners in financial distress is increasing due to the rising cost of living, interest rate hikes and job losses. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, this has led to a number of South African homeowners being unable to afford their homes. Many South African homeowners have high debt-to-income ratios. This, coupled with rising food prices and tariff hikes, leaves homeowners in a situation of financial distress.

The best thing to do is take action, as remaining in a financially distressed situation is a recipe for disaster. Here’s some advice from Goslett to homeowners on how to tackle such a dire situation:

Assess and communicate

Figure out where you are financially, and whether you can continue your monthly bond repayments. If not, the best thing to do is contact your bank as soon as possible, to notify them of this. Defaulting on a bond repayment is not an option as this could result in a tarnished credit record, or losing your property entirely. However, informing your bank of your circumstances can prevent this.

It is in the bank’s best interest for you to continue living in your home, and paying the bond, so chances are, your bank will attempt to assist you by rescheduling your payment or giving you financial advice. However, the bank cannot do this unless you have contacted them and communicated your situation.

“Communication between the homeowner and the bank is crucial if the homeowner wants to resolve the situation. In certain instances, banks are able to re-negotiate the term of the loan from 20 years to 30 years in order to decrease the amount of the monthly bond instalment. Certain financial institutions could be willing to offer the homeowner a payment holiday of between three and six months - this might be all that is needed to provide the homeowner with enough breathing room to get back on their feet,” says Goslett.

Get the professionals involved

If the situation has gotten to a point where it’s beyond your capabilities to handle, consult the professionals. A debt counsellor will be able to review your situation and advise you on the best way to move forward. Debt counsellors will come up with way for you to pay creditors back, this is called a repayment plan. To ensure that legal action cannot be taken against you or your property repossessed, they will apply to the court to get the repayment plan approved. “An alternative option is for the homeowner to be placed under administration rather than debt review. In this case the property can be repossessed to mitigate loss,” Goslett explains.

Sell your distressed property

If you cannot work out a financial plan to keep your home, it’s best to put it on the market as soon as possible. Contact your local real estate agency, as they have experience selling distressed property and can advise you on the best way to make sure your home gets sold at a market-related price. If you have built up enough equity, this option means that you may have enough money to pay off your outstanding bond, as well as other debt.

Goslett states that RE/MAX of Southern Africa is the only real estate company in the country that has a dedicated distressed property department. While financial distress can be stressful, homeowners can turn to these experienced property professionals to guide them through the sale of their property.

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