HELP IS AT HAND FOR DISTRESSED HOMEOWNERS

Peter Gilmour, Chairman of RE/MAX of Southern Africa, gives some insight into distressed property sales

Over the past 18 months the number of people in South Africa who are unable to service their mortgage payments has increased dramatically. In fact, the National Credit Regulator's first quarter report on consumer credit demand indicated that as at the end of March 2010, credit bureaus had records for 18.21 million credit-active consumers.

It is interesting to note that of the 18.21 million credit-active consumers only 54% were classified as in good standing. The number of consumers with impaired records continued to increase reaching 8.37 million which indicated a deterioration in the credit records of 191 000 consumers quarter-on-quarter and 915 000 year-on-year. Adverse listings and judgments contributed more in this category compared to the category of three or more months in arrears.

Peter Gilmour, Chairman of RE/MAX of Southern Africa, says that more and more homeowners are facing a situation where the banks are looking to repossess their properties. This could ultimately lead to the family losing their home as well a judgement being taken against the homeowner. A judgement will result in the homeowner receiving a bad credit rating, which will prevent them from obtaining other sources of credit in the future.

While working for RE/MAX in the US, Gilmour has, over the last three years, gained vast experience in this area while working with the Distressed Property Institute and major US banks that faced similar problems to what our banks are experiencing today. Gilmour obtained the Certified Distressed Property Expert designation [CDPE] from the Distressed Property Institute and RE/MAX as a company was involved with tens of thousands of homeowners who found themselves unable to make their mortgage payments.

He says that situations where a home is about to be repossessed can be averted if the homeowner seeks professional help from an experienced estate agent or legal advisor. "Homeowners do have alternatives if they are unable to make their home loan payments, but the majority of people in this position do not know what their options are."

RE/MAX of Southern Africa is currently working with First National Bank, Standard Bank and Nedbank to assist their clients' dispose of the properties they can no longer afford in a timely manner, thereby avoiding the devastating effects of the adverse credit rating. RE/MAX of Southern Africa, in its commitment to this project, has established a fully trained and computerised department consisting of five well-experienced Sales Counsellors. Headed by Gilmour, the department manages approximately 200 distressed sales leads per month.

Gilmour says that while the banks' method of distressed property sales has been successful, homeowners need not wait until they are about to lose their home to sell it through an assisted sale programme.  "Homeowners who find themselves in financial difficulty have the option of voluntarily selling their home through the RE/MAX Assisted Sales Department before they are required to do so by the financial institution which holds the bond."  Here a RE/MAX Assisted Sales Counsellor will be able to arrange for the financial institution that holds the bond to enrol the homeowner on the assisted sales programme, where they would then benefit from the discounts and incentives that the various banks' programmes offer.

"The key for homeowners who see a financial problem coming in the future due to job loss, a reduction in benefits, unforeseen capital expenditure, possible future interest rate rises, a death in the family or any event which would impact heavily on finances, is to contact your financial institution or a real estate professional to assist you and discuss the options before it is too late," says Gilmour. "Most people who find themselves in financial difficultly may find this a difficult thing to do as their pride or ego makes them think that the problem will go away. This seldom happens," he says.

"The primary concern for us is to keep the homeowners in their property and to look for a way to either restructure their loan or to sell the property with minimum impact to the owner's capital or credit record. Happily South African banks are co-operating, with most institutions willing to find creative ways to assist their clients."

Ryno Mey, First National Bank's (FNB) National Quick Sell Manager, says that the bank's Quick Sell programme actively offers financially stressed customers a tangible solution in their time of need. "This private sale option enables the customer to sell their property voluntarily in the shortest possible time and allow them to move forward with their lives, clear of a debt burden that they can no longer service," he says. "All necessary steps are taken to ensure that the property is marketed and sold in the quickest possible time at the best achievable price which greatly reduces the time and expenses of the usual recovery processes. "

Gilmour reports that the RE/MAX Assisted Sales Department has an average of 80% success on all offers to purchase submitted to the banks on their distressed properties. These properties, he says, are sold on average within 30-45 days and on average also achieve more than 85% of the asking price. He also notes that in all cases there are discounts of up to 50% on the attorney transfer and registration costs for buyers which act as incentives to assist the sellers in marketing their homes successfully.

"Our distressed sales leads received from the banks range from properties valued at R200 000 up to homes valued at R4m ," says Gilmour, although he notes that the majority of distressed property leads they receive are for homes valued between R700 000 and R2m. Gilmour reports that to date RE/MAX agents in Southern Africa have successfully assisted hundreds of South African homeowners who have found themselves in distressed situations.

Gilmour anticipates distressed property sales to continue to be a reality for the next three to five years. He encourages distressed homeowners to take the opportunity to sell their home and nullify their debt before they get to the point where they could lose it and potentially get a bad credit rating which will affect them for many years to come.

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