There has been no noticeable drop off in the number of distressed homeowners forced to sell their properties, judging by the latest figures from First National Bank (FNB).
More than 3 500 of FNB’s struggling home loan clients have already off-loaded their homes since February last year through FNB’s Quick Sell Plan. The latter was introduced to help FNB customers, who can no longer afford to repay their mortgage debt, sell their properties through a dedicated sales channel before the bank is forced to take legal action.
Another 1 000 odd distressed FNB homeowners currently have their properties listed on Quick Sell. Ryno Mey, FNB’s national Quick Sell Manager, says the bank continues to see a consistent inflow of Quick Sell mandates with no real increase or reduction over the last six months. Most Quick Sell properties fall within the price bracket of R500 000 to R1m.
Mey says properties listed on Quick Sell generally find buyers between 30 and 60 days, which compares favourably with the four months and four days (FNB figures) on average that it currently takes to sell a house through a traditional sales channel.
He believes pricing is the key to selling distressed properties quickly. “The one lesson we have learned is that where a property is priced correctly there is still a very vibrant market out there. It’s therefore crucial that properties are revalued before they are placed on Quick Sell.”
Mey says they set a reserve price of 80% to the bank value and it’s up to the agent marketing the property as well as the seller to negotiate a listing price of between 80% and 100% of the bank value. Most properties are sold at an average 10% below bank valuations.
Mey believes besides realistic pricing, another reason why the Quick Sell method has been so successful is the fact that FNB is prepared to share the shortfall with the seller. “We recognise the fact that while property values have dropped, outstanding home loan balances are still at levels from previous years. As such, where selling prices are below outstanding mortgage debt we provide our clients with a 15% concession to the shortfall.”
The following example illustrates how the concession works: Let’s assume the client owes the bank R1m. His property is valued at R900 000 and sells for R800 000. The shortfall to the bank after the sale of the property is thus R200 000. The Quick Sell concession of 15% is calculated against the outstanding loan balance of R1m which equates to R150 000.
That amount is then subtracted from the shortfall of R200 000 which leaves the client with only R50 000 that needs to be repaid to the bank, therefore a “discount” of a substantial R150 000. Mey says the shortfall is repayable to the bank over a period of up to 10 years interest free. - Joan Muller
Readers' Comments Have a comment about this article? Email us now.
And what about the estate agent's fee that has to come out of the sale. If there has to be an improvement in house sales, first, all the costs that are involved in selling and usually buying at the same time, needs to be addressed. All are overpriced and taking into account the fact that house prices have gone up in the last few years, erodes the profit that a person makes when selling, Why can't there be a fixed price for transfer costs, estate agent's fee etc. After all, is there any more work attached to a sale for R3m compared to R2m. - Jeanette May
OK so where do buyers find out about Quick Sell properties? Surely if this was well marketed and generally available then there would be more buyer interest – which would lead to an increase in the final sale price. Result: Everyone is happier at the end of the day. So someone please, let us in on the secret so we can have more smiley faces in our beloved country. OR, could it be that my cynical nature is correct when it whispers to me that you have to be on the inside to get in on the action??? - Lorndor
I would not advise anybody to buy an FNB Quick Sell property. I bought a property that was listed as an FNB Quick Sell in Edenvale. The offer to purchase was signed by me in August 2010. The agent said she believed I would be able to move in before the end of the year. I then planned to move over December. Then I learned from the conveyancing attorneys that the seller had not come to sign the acknowledgement of debt, delaying the whole process. Now they informed me that there is an inderdict on the property that needs to be lifted which will take another 3 weeks. After that they must apply for bridging finance to pay the outstanding rates and levies which will take another week. Only then, once the certificates have been received, they should be able to lodge the transfer in the Deeds Office. This means I can only expect to move in by February. This is about double the time taken for a normal sale. I had to make alternative arrangements because of the delay. On top of that, the property is sold as is, and no repairs to door handles etc. will be done by the seller of a Quick Sell property because they do not have the money. So you might find a Quick Sell at a good price but be prepared for a lot of extra complications and for a very long process. - Anton