Get agent advice when buying a Property in Possession
Monday, 03 July 2017, 08:50
PROPERTY NEWS - For homebuyers on a tight budget, a Property in Possession (PiP) - a home that has been repossessed by a bank - may seem like a very good proposition, because such properties are often available at less than market value.
"Banks often also offer further incentives to buy PiPs, such as preferential home loan interest rates and lower bond registration and legal fees, and a further attraction is that no transfer duty is payable on these properties," says Gerhard Kotzé, MD of the RealNet estate agency group.
However, there are potential pitfalls when buying PiPs, which makes it highly advisable that prospective buyers engage a reputable estate agent to advise them before they finalise the transaction.
An experienced agent will be able, for example, to identify the problems which led to the house being repossessed by the bank. Generally speaking, a property only ends up in possession these days when the original owner has been unable to sell it on the open market, even for just the amount outstanding on the bond - and there are usually good reasons for that.
• An owner who could not pay his bond instalments is unlikely to have spent money on proper maintenance, and many PiPs are in less-than-great condition. An estate agent will spot the signs and be able to direct you to professionals who can estimate the cost of repairs before you buy.
• The original owner may not have been able to sell the property because it has been overcapitalised, or because the area is in decline and there is very little demand for property there. This would make it a very risky buy and, once again, a knowledgeable agent can warn the potential buyer.
• If they want to get the best deal, potential buyers need to question how the bank arrived at the price it is asking for the property. The longer the property has been in possession, for example, the more the bank will have spent on holding costs, such as rates, maintenance and security. It may also have had to settle large amounts for municipal services left unpaid by the previous owner - but these expenses should not necessarily be passed on to the new buyer.
"Indeed, while a PiP may well be a 'bargain', particularly for a keen and able DIY enthusiast, professional advice is still needed on the true market value, the likely cost of repairs and the best way to access a favourable home loan package - and the best way to get that advice and knowledge is to enlist the help of a professional property practitioner."
Issued by RealNet
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