Buying a Repossessed House
Unfortunately, there is always a fair amount of repossessed
houses in South Africa just as in all countries. However,
this means other people who are looking for a home to buy
can purchase one for a great price. There are several tips
and facts that everyone should learn before buying a repossessed
house.
Before You Buy
Buying a repossessed property should be a good financial
deal, so research its fair market value, location, sale terms,
and title deed. If you are unclear about any of the sale terms,
talk to your lawyer or ask the High Court Sheriff to explain
them before the sale begins.
Deposits and Commissions
Most often, a person buying a repossessed house will need
to put down a deposit. This deposit usually amounts to 10%
of the buying price. Also, a commission to the Sheriff needs
to be paid. And if you cannot come up with the money for the
balance owed on the house, your deposit will be forfeited.
Other Payment Terms
You can expect in many cases for the Sheriff to request a
payment of cash or cheque upon the closing of the sale. And
if you are unable to meet the terms, the house will immediately
be available for sale and you could be responsible for any
price deficit.
Occupied Properties
Before making an offer on a repossessed house, it is important
to know if the house is currently being occupied. If so, you
will probably be liable for any costs incurred for obtaining
a vacate notice as well as clearing out the resident's personal
property left behind.
Title Deed Restrictions
It is your responsibility to inquire about any imposed restrictions
attached to the title deed, such as Town Planning Scheme usage
restrictions. Also, if there is a pre-emptive right in place,
or a right of first refusal, the house can be sold while subjected
to this right.
As It Stands Clause
Most repossessed properties have a voetstoots, or as it stands,
clause. So it is always recommended to visit the property
before buying it in order to locate the property boundaries
and overall condition of the home.
Property in Possession
In the case where the bids made on a home are too low, the
bank who held the mortgage loan could exercise the option
of buying said home in order to pay for the debt owed. When
this occurs, it is called a Property in Possession, or PIP.
And when the bank buys the repossessed house, they will immediately
turn around and sell it so as to be unburdened from the cost
of maintenance and to also try to come close to breaking even
on the expenses put toward the property.
If you are interested in a PIP and you are not a VAT Vendor,
which applies to businesses who make a certain amount of yearly
profit, you do not have to pay transfer duty to the South
African Revenue Service. Instead, the bank will be liable
for the VAT, or Value Added Tax, because the bank is for all
intents and purposes the seller.
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