Decisive action can pre-empt distress for home owners

Given the sustained economic challenges, it is estimated that around one third and possibly more South African home owners are finding themselves in financial stress and unable to maintain their monthly mortgage payments says Seeff chief executive officer, Stuart Manning and, he adds, this is an ever-increasing stress.

This, he says, is a global phenomenon rooted in the prolonged global financial crisis. The most important consideration for such owners he adds is to be informed about what their options are and to take decisive steps to minimize the risk of added financial stress and burden. It is also not a phenomena unique to lower and middle class earners, rather he says, it affects home owners across the income groups.

While the distressed market imploded in the big USA and European markets, South African banks were particularly responsive to the potential fall out by developing rescue programmes and working with real estate agents says Manning. These packages, he adds aim to assist home owners in a responsible manner by selling the homes as quickly as possible with some programmes providing a discount on the loan amount and the potential of restoring the financial standing of such owners he says.

Manning advises though that there are options for owners to pre-empt distress. Finding yourself in a position where you can no longer afford to pay your home loan or where you are unable to catch up on arrears, does not need to lead to added financial stress, he says. There is a window of opportunity in the lead up to foreclosure by the bank says Manning where real estate agents can assist the home owner on a confidential basis to transact responsibly. The agent can act as a facilitator and negotiate with the bank to assist in bringing about a pro-active solution rather than prolonging the financial crises which accumulates with each week or month that a property remains in distress.

Understanding the current market dynamics and working with your real estate agent to ensure your property is priced to sell is critical though, explains Manning. Properties are taking between four and six months to sell and obviously much longer if they are not priced in line with what buyers are prepared to pay. It is important for owners to appreciate that homes are now selling on average at 20 to 30 percent below their values of five years ago.

By taking decisive action, you minimize the potential added financial risk says Manning. The most immediate step, he concludes is to consult a real estate agent who is working closely with the banks, who is skilled in dealing with distressed properties and who has a thorough insight into your local property market to assist you in transacting responsibly.