Solutions for homeowners in financial distressSolutions for homeowners in financial distress

The Covid-19 pandemic has left many people in financial distress, here are some options for homeowners who are struggling.

The COVID-19 pandemic has left many consumers struggling to stay afloat. While for some, it may simply be a matter of readjusting certain behaviours to rectify their financial situation, others may find themselves in more dire circumstances.

"Because many feel overly stressed and sometimes shameful about their financial distress, they are less likely to communicate about the topic and ask for help. However, it is vital that homeowners in financial trouble take immediate action and proceed with the necessary steps before the situation slips out of their control. It is a time to act decisively, take control of the situation and consult with people who can assist," advises Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett.

Homeowners need to be honest with themselves and look at their circumstance objectively when determining whether they can continue to pay their bond. If a homeowner can no longer afford their bond, they need to notify their lender as soon as possible. "It is best to be upfront with the bank and tell them the situation, rather than defaulting on a payment without notification. If the situation is left to run its course, it will not only result in the homeowner losing their property; it will also lead to a tarnished credit record and blacklisting, which leaves the consumer unable to obtain any credit for the next five to 10 years. This means that even renting a property will become difficult because most landlords do credit checks on their potential tenants," Goslett cautions.

Some homeowners might be under the impression that the bank will repossess their property as soon as they communicate their distress. However, this is not the case. Banks want the homeowner to keep their property and will try to assist where possible, but the only way they can help is if they are aware of the situation. According to Goslett, there a few ways that the bank can help the homeowner, such as rescheduling debt, offering some advice on the right steps to take or renegotiating the term of the loan from 20 years to 30 years. Once the homeowner tells the lender about their financial situation, the bank will be able to offer solutions.

If the situation has gotten to the point where the homeowner can no longer handle it by themselves, Goslett advises that they make use of a professional debt counsellor who can provide guidance. A debt counsellor will be able to assist the homeowner in reviewing their finances and submitting a proposed repayment plan to the relevant creditors.

"Homeowners that do not see a way out of their financial situation can opt to consult with a real estate company that specialises in the sale of distressed properties. Banks are working with agencies to sell distressed properties at market-related prices. If the homeowner would like to keep their credit record intact, the most effective method of doing so is selling the property and recovering from the financial crisis. In certain cases where the homeowner has built up enough equity, they may be able to cover not only their remaining bond but also some other debts as well. Essentially this option could provide the homeowner with an opportunity to start again with a clean slate," Goslett explains.

He goes on to emphasize the importance of having real estate reclassified to lockdown level 4 or 3. "Not allowing real estate to operate will have detrimental effects on the economy as it freezes people's ability to access finance through liquidating their largest asset - their home."

RE/MAX of Southern Africa is the only real estate company in the country that has a dedicated distressed property department and Certified Distressed Property Advisor (CDPA) qualified agents that are trained to assist homeowners with these specific types of properties and situations. "Our agents are best positioned to assist homeowners in the current market and can offer a way out that preserves their credit and relieves them of their real estate uncertainty. I implore government to reconsider their current classification of real estate services so that we can help South Africans access much-needed income from the sale of their homes. Not only will this income help to keep homeowners afloat through these tough times, but it will also help entrepreneurs to pay their employees and keep their businesses open," Goslett concludes.