If you currently find yourself presented with the opportunity of buying a distressed residential property there are a few things you ought to know regarding the processes that come part and parcel with having legal ownership of the property you are interested in buying.
Buying a distressed residential property
When an individual can no longer pay off their mortgage due to unforeseen circumstances such as for example job loss due to covid, they have the option of reaching out to their bank and voluntarily resolving their bond by way of a bank-mandated property sale.
According to Vleissentraail Eiendomme/ Properties Group, “ a bank mandated property is a written instruction to a specific marketer to sell a property via private treaty or auction. This is normally through a power of attorney which the client gave the bank. It can also be that the client is part of a business rescue process and the bank prefers a certain supplier which they recommend to the business rescue practitioner.”
In this instance, the bank is responsible for appointing an estate agent that will market and facilitate the best deal for both the bondholder as well as the bank. The appointed estate agent is responsible for presenting any offers potential buyers may be offering towards the property and if the current bondholder is not satisfied [and has enough time to find an offer they are satisfied with] the current bondholder has the right to decline unsatisfactory offers.
If the current bondholder finds a buyer who offers to purchase the property and buy the current bondholder out of their mortgage, the current bondholder would then communicate this to the bank and facilitate a property transfer of ownership in which the buyer would then be responsible for settling the previous owners bond debt with the bank and thereafter, the new property owner will be responsible for settling any outstanding rates and taxes.
However, should the current bondholder run out of time, the bank will more often than not, be forced to take legal action against the bondholder in which the High Court will take a judgement against the bondholder. Once a judgement has been taken against the bondholder, the bondholder no longer has any rights to sell the property and the court then appoints a sheriff of the court to attach the property and execute a Sheriff Sale in Execution.
Sheriff Sale In Execution Auctions have an entirely different set of processes and regulations that need to be considered such as:
In rare instances when there is no buyer for a Sheriff Sale In Execution property auction, if the banks deem a property valuable, they can buy the property back and sell the property as a bank repossessed property.