South Africans can get cheap homes – with a catch

Repossessed homes in South Africa can offer a cheaper entry into the property market, but buyers must beware of hidden costs, legal risks, occupation issues, and long-term affordability to avoid making an expensive mistake.

With the market showing signs of recovery, South African property prices are continuing to rise, which means affordability is becoming an increasing concern for many prospective buyers.

TPN Credit Bureau’s Legal Counsel, Rowan Terry, explained that, against this environment, repossessed properties are often marketed as a more accessible way to enter the property market.

“These properties are frequently marketed as discounted opportunities, especially appealing to first-time home buyers,” Terry said.

However, while repossessed properties can offer value, affordability is not determined solely by the purchase price, and buyers must carefully consider several legal and financial factors.

“The starting point for any buyer should be an honest assessment of whether the advertised price reflects a genuine discount,” Terry said.

“Banks are required to recover as much of the outstanding bond as possible, and in practice, this means that prices can be increased through competitive bidding, particularly at auctions.”

Terry stressed that buyers should therefore compare the price against recent comparable sales in the area rather than relying on the general belief that all repossessed properties are sold below market value.

Another important consideration is the property’s financial position. “Repossessed properties often come with outstanding municipal charges, utility arrears, or body corporate and homeowners’ association levies,” he said.

“Although a municipal clearance certificate is required for transfer, this does not always eliminate the risk of delayed transfers or post-transfer disputes.”

Terry stressed that buyers should ensure they fully understand the outstanding amounts and how they will be settled before the transfer takes place.

Legal, maintenance, and hidden costs

“Occupation of the property is also a significant factor,” Terry said. “Many repossessed properties remain occupied by former owners, tenants, or unlawful occupiers at the time of sale.”

Purchasing such a property does not automatically entitle the buyer to vacant possession, and evictions in South Africa are highly regulated court processes that can be lengthy and costly.

“These potential delays and expenses must be factored into any affordability assessment when deciding whether to purchase a repossessed home,” Terry cautioned.

Evictions in South Africa are strictly regulated under the Prevention of Illegal Eviction from and Unlawful Occupation of Land Act.

Under this Act, property owners are required to obtain a court order, give proper notice, and allow occupiers a hearing before any removal can take place.

Courts must also consider factors such as how long the occupiers have lived on the property, whether vulnerable people, such as children or the elderly, are affected, and whether alternative accommodation is available.

In addition, any procedural mistakes or unlawful actions, such as changing locks or cutting off services, can result in applications being dismissed, claims for damages, or even criminal liability for the owner.

Terry added that the physical condition of repossessed properties requires equally careful attention, as they are typically sold on a voetstoots basis and have been poorly maintained.

“Limited access for inspections, general neglect, or even vandalism are not uncommon, and repair costs can quickly offset any initial savings on the purchase price,” he said.

“In addition to the purchase price, buyers must also budget for transfer duty, conveyancing fees, and compliance certificates where applicable.”

Terry warned that these costs remain payable regardless of whether the property is bought at a certain discount and should be included in the overall affordability calculation from the outset.

Finally, he cautioned that prospective buyers should assess affordability in the context of long-term ownership.

“Ongoing municipal costs, levies, maintenance requirements, and the property’s resale or rental potential all play a vital role in determining whether the investment is sustainable over time,” he said.

While buying a repossessed home may cost less initially, this does not automatically translate into long-term value.

Terry added that repossessed properties can provide an affordable entry point into the South African property market, but only where buyers approach the process with realistic expectations and thorough due diligence.

“Do the research, carefully consider your options and avoid an expensive mistake,” he explained.