A closer look at bank assisted sales

A bank assisted sale (or distressed sale) is the sale of the owner’s property with the assistance of the bond holder (the bank). Contrary to popular belief, the bank doesn’t sell the property but rather assists the owner with the sale in order to limit damages for all relevant parties.

December 11, 2020

A property owner may consider a bank assisted sale if they have fallen on hard times and are no longer able to pay their monthly home loan repayments, rates and taxes, and levies (if applicable). In this situation, they may ask the bank to assist with the sale of their property – this would be before the bank takes legal action against them. Or the bank may contact the property owner to offer assistance with the sale of the property before it goes on auction as a result of legal action by the bank due to bond arrears.

The bank and property owner will then enter into a mandate where they agree that the bank will appoint an estate agent of their choice to assist with the sale of the property.

6 things to know about bank assisted sales

  • The bank will appoint an estate agent on their distressed sale panel. While this means that the seller will not be able to appoint an estate agent of their choice, the bank appointed agent will be well-versed in this type of sale and will understand the process followed by the bank.
  • The estate agent’s commission will be limited to a maximum percentage as agreed by the bank and estate agency.
  • The bank will appoint transfer attorneys on their panel. There is usually a fee agreement in respect of the transfer fees payable by the purchaser.
  • If there is a shortfall on the mortgage bond after the sale of the property, the bank may provide the seller with a discount on the shortfall if a mandate was signed with the bank before the sale.
  • Depending on the bank, expenses like rates and taxes, levies, compliance certificates and legal fees may be debited to the mortgage bond or arrangements may be made to offer bridging finance to the seller at a discounted rate.
  • If there is a shortfall, the bank is able to provide all relevant information relating to the shortfall to the credit bureaus in terms of the National Credit Act.

Written by Wessel de Kock

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