Almost 25% of sellers are giving up their homes because they can no longer afford to keep them.
From April to June, the number of sellers under financial pressure shot up 7% from the first three months of the year, and is starting to edge closer to the high volume that sold for this reason in the last quarter of 2022.
Selling your property can provide immediate financial relief by eliminating mortgage payments and freeing up equity that can be used to address current financial needs.
Read our latest Property360 digital magazine below
But, says Cobus Odendaal, chief executive of Lew Geffen Sotheby’s International Realty, you have to remember that a quick-fire sale is unlikely to achieve as high a sale price as when you have the luxury of time and are able to wait for a better offer.
“And, depending on the market in your area, you could also lose some of the purchase value.”
If the property is fully paid up and not bonded, applying for an access bond could be a better solution as it buys you time and gives you a chance to improve your financial circumstances.
“Consider your long-term financial goals and stability. If you foresee difficulties in finding a new job or anticipate challenges in meeting ongoing expenses, selling the home and securing financial stability might be a more viable option,” he advises.
If you choose to go this route, you need to employ an agent who has an intimate knowledge of the marketplace in which you are selling, advises Richard Gray, chief executive of Harcourts South Africa. We are now in a buyer’s market, so if you do not price correctly you will not be able to sell, and your financial situation will only get worse.
“It is vitally important that sellers that have to sell due to financial constraints sell quickly and that their agent is able to present solutions to assist them not only to sell, but also navigate any potential shortfalls they may face in this market place.”
You should also speak to your bank as these institutions have various programs to help clients who are struggling with repayments. The Bank Assisted Sales programs that the banks run in partnership with real estate groups give the homeowner who is battling with their mortgage several ‘breaks’ to avoid repossession.
Another option for homeowners unable to meet their bond repayments is to consolidate other debt into your home loan, which is typically your cheapest money.
Property owners who are considering downscaling in order to avoid losing homeownership are advised to sell their home first, before looking for another to buy.
“Many first want to find a property to buy before selling, but in this market it can be advantageous to first sell before buying. A seller can always add in a clause into the agreement of sale to protect themselves from being left without a property,” Gray says.
‘Downscalers’ should consider looking to buy in new developments where they can save on the transfer costs and own a brand new home where maintenance costs should be less.
“It is also important for anyone downscaling to look at all costs including rates taxes, levies etc. Sometimes clients are surprised with double levies in some estates, which means new costs are not that much more affordable than the larger property.”
David Jacobs, Gauteng sales manager for the Rawson Property Group notes that some owners are in denial about the financial side of downscaling as what they think they can afford does not always match reality. For this reason, he advises that they consult with experienced real estate agents in their areas to get a full picture of what is really happening in the market.
“A good estate agent should be able to provide you with an idea of how much you’ll be able to sell for and provide advice on sale and purchase processes, and cost estimates, for your budget purposes. The agent will also be able to match your new needs with a suitable property within your budget that will give you the freedom to enjoy your life with fewer responsibilities.
“Downscaling is not just about selling well and buying more affordably. It’s also about finding a home that fulfils your needs during the next chapter of your life.”