How to Find

Discounted Property


Navigating The Financially Distressed Property Chain

Table of Contents

Freedom of choice for you & your family

~ Introduction

~ The Distressed Property Chain in South Africa

~ Opportunities for Investors

~ Risks to Consider

~ Conclusion: Which Investment Option is Right for You?

~ Offers

Introduction

And why this guide exists

Most of us know how to source properties on the open market through the Property portals of Property24 and Private Property.

And whilst there is nothing wrong with those properties, they don't always provide us with what we want and need

IE: Below Market Value Properties.

Today , I'll be discussing waling you through the Distressed Property Chain which offers much more potential for deeper discounts the further right we go. From urgent sales, to Properties in Possession (PIP), each comes with the potential for deeper discounts, albeit at a deeper risk.

TAKE NOTE!

Remember, my aim as a Property Investor is to try and help people, and that includes stopping foreclosure where possible! The more I work to resolve problems for the seller, the more likely I am to get discounts. Foreclosures result in negative credit records for sellers, whereas selling to investors, avoids that.

The Financially Distressed Property Chain in South Africa


A financially distressed seller is someone facing financial difficulty and is often forced to sell quickly to avoid foreclosure or other financial consequences. The Financially distressed property chain moves through several stages where investors can help people and find potential deals. With each stage comes different risks, challenges, and opportunities.

Its important to note though, that the stages are not set in stone as each property and seller is different. For example, investors with larger portfolios may be given more leeway by the banks when it comes to tough times and will try to avoid foreclosure.

They have a bigger portfolio to protect.

In comparison, an investor with only 1 property and unable to make payments, the banks would have less exposure and would press more for payment and quick sales.

Grant Cardone once described this as not having enough debt.

1 : THE STANDARD SALE - BUT URGENT

In the case of a seller entering financial difficulty, the seller has recognized their need to sell as they have missed 1 or 2 payments. The bank has made contact and are in discussion with the seller to let them know that if after 3 missed payments, they will move to recoup there losses and encourage the seller into the "2 ~ Bank Assisted Sales" process

I instruct my sourcing agents to look for these types of properties, as I can speak directly to the seller making things simpler, and allow for creativity with financing and price. Sourcing agents find us through our investing website site www.zahomes.co.za and bring us great deals ... often before the property has hit the market.

Likewise, with estate agents, If, you are in their little black book of reliable investors, they may reach out to you before posting to the property portals, and Its the biggest reason I suggest keeping contact with several agents in your areas letting them know your hunting brief. Alternately, keep a look out on the portals for properties described as "urgent sale" or "priced to sell" etc.

When a property like this comes to me, I almost always suggest an ISA. It doesn't always get accepted, but it never hurts to ask

The seller is liable for rates, taxes, levies, agent fees, electrical and water certificates etc. But remember, I'm a problem solver. If it's a financially distressed property, the owner may not be able to afford this. As such, I'm looking for where I can take on the cost, at my risk, and because I'm doing that, would ask to be compensated through a lower purchase price.

At this stage I can still use my own OTP although most agents will push to use their template. Don't be shy to scratch out anything you do not like on their template, initial and send back.

Caution: Properties can still have maintenance issues due to the seller’s financial distress so make sure to add time for a thorough due diligence in your OTP and don't let urgency distract you. Watch below for an example of an issue we only discovered after signing the OTP, but still within our due diligence period. And yes, we were able to offer the seller the option of fixing it, or lowering his price and we fix it.

Automating your Hunting Briefs

When im looking for a new property, ill often create a video of my hunting brief and email this to agents and even other investors.

below is an exmpale of this

2: BANK ASSISTED SALES

Also known as “distressed sales” or “assisted sales,” this stage happens when the bank works with the homeowner to sell the property voluntarily before legal repossession. Banks often list these through select estate agents at slightly below-market prices to encourage a quick sale - They will often be marked up as urgent sales on the property portals.

The seller is still liable for rates, taxes, levies, agent fees, electrical and water certificates etc. Banks may look at allowing an acknowledgment of debt when the sale price is below the outstanding debt with structured payment terms for the seller.

The use of my own OTP becomes trickier here and agents will often say they are mandated by the bank to use their templates.

The advantage for investors is that these deals usually come with cleaner paperwork than the rest to the distressed chain, but they may still carry urgency and require fast financing. They are also properties that are often in good condition and can be bought at a discount, making them an attractive option for investors who want to avoid the renovation costs of physically distressed properties. But beware... things can and do go wrong as can be seen in the video below

Sales can take longer as bank approval is needed if there is a shortfall, and discounts may be smaller than at sheriff sales.

3: BANK MANDATED SALES

If a bank-assisted sale doesn’t succeed, the property can become bank-mandated. Here, the bank has taken control of the sale mandate but the property is not yet in full possession of the bank. They typically appoint an estate agency panel to market and sell these properties on the bank’s behalf, and discounts are often more significant at this stage, as the bank is motivated to avoid a full repossession.

Whilst the seller remains technically liable for rates, taxes, levies, and compliance certificates, distressed owners rarely have the funds to cover these. In practice, the bank can step in to settle arrears and arrange certificates, ensuring the property can transfer. Agent fees are paid by the bank, while the buyer remains responsible for transfer costs. This makes bank-mandated properties cleaner and less risky than sheriff sales, and again can offer an even deeper discount.

ISA's are possible here, but often tricker to negotiate as the bank is looking for a clean sale and heavily influence the process. Its my least favorite of the pre auction phases for that reason.

FORECLOSURE PROCESS OVERVIEW

This is where things change dramatically and its an area I do not go into. The bank mandate has been unable to sell and they now move into the foreclosure process which can be summarized as follows:

1 ~ Once the bank has established that you are not able to rehabilitate your loan, and/or unable or unwilling to sell your property to reduce the debt, the bank forecloses.

2 ~ The bank instructs its attorneys to issue a summons. The summons is delivered by a sheriff of the court to your chosen address.

3 ~ An application to the High Court is made to allow the property to be sold by a sheriff of the court.

4 ~ A judge assesses the application and ensures that a fair process has been followed.

5 ~ The sheriff sets a date for the property to be auctioned and advertises the auction in the Gazette.

6 ~ The bank calculates a market-related reserve price in an attempt to maximize the price that you will receive, to offset your loan.

7 ~ If the reserve price is not met, the bank will buy the property and then sell it on the open market, via estate agents or auctioneers.

8 ~ When the property is sold, any proceeds are credited to your account, less the costs incurred.

9 ~ If there is a shortfall during any part of this process, it will be collected from you usually in the shape of an Acknowledgment of Debt (AOD)

1 ~ PROPERTIES UNDER AUCTION

Some banks run their own auctions, either online or through auction houses, to sell distressed property quickly. Compared to sheriff auctions, bank auctions are usually more transparent, with proper due diligence packs and access for viewings. Investors can pick up bargains, but competition can be fierce, and properties are still sold “as-is,” meaning risks of hidden costs remain..

The seller is still liable for rates, taxes, levies, agent fees, electrical and water certificates etc.

I cannot use my own OTP here

Auctioned properties can be either physically distressed or financially distressed. The auction process can be competitive, and investors need to be prepared to act quickly. It's important to secure financing in advance, as auction sales often require immediate payment.

5: PROPERTIES IN POSSESSION

The bank now owns the property. I do not like this sector, and do not operate in it, I would highly recommend going to one of these at least once in your life. They can be emotionally draining to watch if the current owner attends, and

5. Property in Possession (PIP)

Properties in possession are those that the bank has repossessed after the previous owner defaulted on their bond. The bank is typically eager to sell these properties quickly to recover its losses, and they are often sold at a discount. However, PIP properties may require repairs, and investors should conduct thorough inspections before making a purchase.

it is an experience to behold!

5. Property in Possession (PIP)

Finally, if all else fails, the bank repossesses the property completely — these are called Properties in Possession (PIP). At this point, the bank is the legal owner and typically sells the property directly through its repossessed property department. PIPs are often the safest distressed deals for investors: transfer fees are usually covered by the bank, outstanding rates may be cleared, and the bank is motivated to dispose of the asset. However, discounts are not always as deep as earlier stages, since the bank is managing the sale in a more controlled way.

Properties in possession are those that the bank has repossessed after the previous owner defaulted on their bond. The bank is typically eager to sell these properties quickly to recover its losses, and they are often sold at a discount. However, PIP properties may require repairs, and investors should conduct thorough inspections before making a purchase.

Opportunities for Investors


Both distressed properties and financially distressed properties offer unique opportunities for investors in South Africa:

1. Distressed Property Opportunities

For investors with experience in property renovations, distressed properties offer the chance to purchase below market value, invest in necessary repairs, and either flip the property for a profit or rent it out for steady income. These properties are commonly found at auctions or through bank-mandated sales.

2. Financially Distressed Property Opportunities

For investors seeking quicker transactions and fewer upfront repair costs, financially distressed properties present a simpler opportunity. These properties are usually sold below market value by motivated sellers or through bank-assisted sales, where the condition of the property is typically sound.

Risks to Consider


Investors must be aware of the risks associated with both types of properties:

1. Distressed Property Risks

The main risk with distressed properties is the potential for renovation costs to spiral out of control. Structural problems, compliance issues, or hidden defects may only become apparent after purchase. Additionally, auctioned properties often require immediate financing, leaving little time for due diligence.

2. Financially Distressed Property Risks

The key risk with financially distressed properties is the legal or financial complications that may accompany the sale. These properties may have unresolved debts that need to be settled before the sale can proceed. You can also end up with squatters

at auctoins yuo get banks bidding on their own properties and syndicates operating

Conclusion: Decide which Investment Option is Right for You?


Both distressed and financially distressed properties offer compelling investment opportunities, but they come with different challenges and rewards. Find what risk appetite you have and

Distressed properties offer the potential for significant upside if you have the skills and resources to handle renovations. They can often be acquired at auctions or through bank-mandated sales, but investors should be prepared for higher risks and hidden issues.

Financially distressed properties provide a faster path to acquisition with fewer immediate costs, as they are often sold by distressed sellers or through bank-assisted sales. These properties are typically in good condition, making them an attractive option for investors who want to avoid major

Ready to Take Your property Investing knowledge to the Next Level?


Congratulations on taking the first few steps and being
amongst the few who take action!

I commend you for coming this far!!

And as a thank you, I want to show you a few more ways in
which I can further help you. And this is truly only for those that are
interested and want to level up faster in their cashflow and wealth journey.

So far we have covered the basics of finding below market
value property, but their is so much more to come. Our sourcing course dives
deeper into additional places to find below market value properties, how to
financially analyze deals beyond the basics, and how to get investors to invest with you.

This truly is a remarkable course led by a remarkably supportive lady!