Houses on sheriff auction declining

Houses on sheriff auction declining

But bargain hunters can get them for half their value – FNB.

The variety of houses on sheriff auction at First National Bank (FNB) were declining compared to the past year or two because of products that avoid the costly auction process, but FNB’s head of home loans believes customers should look at these properties to find good deals.

A sheriff auction is a public auction held by the sheriff of the court, after a bank gets a court order to attach and sell a house to recover money not repaid on a home loan.

Jan Kleynhans, the CEO of FNB Home Loans, said although he could not advise people to buy property on auction there were bargains with houses now being sold for 20-50% below their initial value. But the variety of bargains were not as wide as they use to be and some of these properties are in a bad state.

“There are bargains but I can’t advise people to buy them .... I do think that the average customer should look at these properties because there are good deals to be had but it means they will have to fix the property up, but there are opportunities”, especially for people who are prepared to invest money to fix them, Kleynhans said.

“It also depends on the quality of the area, the condition of the property. Normally the properties are run-down. The people tend to think if they can’t pay for the property why should they continue maintaining it?”

Kleynhans said FNB probably sold about 100-150 houses a month. The value of the houses under-sheriff auction ranged from R100 000 to R5m. A lot of these properties are in the lower-middle end of the market. In the upper end clients tend to use private auction rather than sheriff auctions.

But sheriff auctions have fallen partly due to the introduction of FNB’s Quick Sell product. These properties, according to Kleynhans are normally snatched up by property syndicates who intend to fix and sell them at higher prices or rent them out.

“You don’t get many people on the street,” Kleynhans said.

With the introduction of Quick Sell FNB says if the client is struggling and cannot pay for the house, the bank agrees with the customer to sell the house normally before the property’s value is distressed by the auction process. The bank also saves money on Quick Sell as it is likely to recover more of its money owed compared to the house being sold on auction.

“We have sold properties of about R4bn on Quick Sell, saving R1bn –R1.5bn if it were sold under the sheriff auction... In the sale in execution in market there is now less property being bought there,” Kleynhans added.

FNB’s non-performing home loan book is valued at about R6bn. But not all of these properties go to sale in execution.

So how does one buy these properties? Kleynhans said the properties are advertised in the Government Gazette as well as in local newspapers. FNB’s website also shows the process to be followed and the properties that might be available.


Denny Crane

Denny Crane
It's not me ... yet. Denny Crane from the TV series Boston Legal. Click on picture if you're not sure who he is!