full screen background image

Consequences when missing your bond repayment instalments

345

For a home owner there are few financial stresses as serious as struggling to make your monthly bond repayments.
According to Leapfrog Property Group, if you cannot work out a financial plan to keep your home, it might be best to put it on the market as soon as possible to recover the costs and settle with the mortgagor (usually the bank) before it takes the necessary legal steps involved in foreclosing on a property.
Banks usually consider a property to be “distressed” when the home owner can no longer afford the bond repayment and has consistently missed the monthly payments. Leapfrog suggests contacting a distressed property specialist when or before you default on a payment.
The foreclosure process by the bank can start as early as when the bond holder is two months or more in arrears.
“In the banks’ experience, once somebody is more than two months in arrears they are unlikely to catch up again and so they usually begin the legal process,” William Verster, a certified distressed property expert and principal of a Leapfrog branch said.
If the bank is alerted in time, they can help by selling the property at as close to its true market value as possible and draw on their network of attorneys to negotiate a solution to the situation.
“The fact is the bank does not want your property and are ready to find a workable solution for recovering the loan, even if this means over an extended period of time,” Verster said.
“This means that banks may be prepared to re-finance the remaining debt, after sale of your property, over an extended period of time, without blacklisting you.”
On the other hand, in order for the banks to foreclose on a property and take it to auction they are required to follow the legal process, which involves taking judgement against the owner. This automatically results in the borrower (mortgagee) being blacklisted for up to 25 years, according to Verster.
From another perspective, purchasing a distressed property can be a way to get a bargain.
When buying a property on an auction, all the debts associated with the property, like outstanding municipal fees and unpaid levies, become the responsibility of the buyer. Whereas when purchasing a distressed property through a qualified agent, all those costs are settled by the bank, who then seeks to recover them from the seller.
Another advantage for the buyer of a distressed property, rather than going the auction route, is that the purchaser has the opportunity of actually viewing the property and is able to determine the true extent of dis-repair (if any), and cost these into his offer price.
“It is important to remember that buying a distressed property can take a little longer than the standard sale time period, and although the seller may accept your offer, it would still require the bank’s approval, particularly in the case where the purchase price, and accumulated other related debts, may leave a large outstanding amount for the bank to recover from the seller.”