Thread by @n2a2o_jay

Losing Your Home at a Sherrif Auction:(sub-topic: The Horrors of Building Your own home)

Life Lessons from a True Story.

If you have fallen behind on your Homeloan, know someone who has, or own Property financed through a Bank, this #Thread is for you.

#PropertyTipsWithNthato

Background:

This is a rather sad story, that happened this year, so brace yourself,

The Thread will be two-fold,

Part 1: Life Lessons from a True Story: Losing Your Home at a Sherrif Auction

Part 2: How to prevent losing your house at a Sherrif Auction

Part 1:Losing Your Home at a Sherrif Auction( Horrors of Building your home)

This couple had a lump sum of R8 Million to Build their dream home, the business was doing well and the wife had a good job.

They decided to purchase a stand at a lush estate for R2.5 Million,

Upon their meeting with the architect and contractor, the total costs of the project would be R7 Million for building the house and finishings.

It was decided that it's best they take a home loan to finance the vacant stand and pay cash to build the house.

Lesson 1: He who owns the land owns the property on that land, by building their home cash, through a financed stand, they practically gave ownership of their home to the bank, until full settlement of the home loan and transfer into their names.

Since banks do not give 100% home loans for vacant stands, they paid a R1 Million deposit, and the bank financed the balance of R1.5 Million.

Construction began and this dream was just a year from realization, well, that's what the contractors said.

A year quickly passed and they soon realized three things:

1. Contracts: They did not sign a turn-key project contract, as a result, any cost overruns were not incurred by the builders, but by them.

2. Cost Overruns: Within a year, the contractor had finished the R7 Million lump sum and the house was far from finished, it was at best 70% complete. They need more money, they went to the bank and got a further R3 Million to finish the project.

3. Project Management: The contractor was the builder & project manager with no financial implications to himself if the money is not used according to plan. It is important to hire an independent project manager to handle finances and track project progress against monies spent

Soon they found themselves, R5 Million in debt with an incomplete, no plan on how to pay it off, & the contractor was nowhere to be found (this is a well-known contractor), the contract they signed absolved the builder of any wrongdoing

At this stage, they have maxed all their savings, R5 Million in Homeloan debt, behind on home loan repayments, living in an incomplete house, owing on rates taxes, and levies.

Fast Forwards two years:

The house was put on Sherrif Auction, due processes were not followed, they were not given final notice, which the law requires. Their home worth over R8 Million(market value) was auctioned for R3.3 Million leaving them in R2 Million debt and no home

But since there are cartels operating at the auctions, The owners tried to stop the auction by presenting the Sherrif with an offer to purchase of R5 Million for the property, the Sherrif refused and continued to auction it.

The owner told the sheriff they did not receive the final notice to auction, the Sherrif refused to listen, soon as the hammer fell, the person who bought the house at the auction had already sent people at the house to start removing locks, doors, windows,

Basically making the home inhabitable, which is illegal.

The owners sought legal advice and have now interdicted the entire process and reported the Sherrif at the Board of Sheriffs.

Prior to the house being auctioned, the owners found a tenant and used the proceeds to pay for the home loan, however, the bank refused payment and continued to press for an auction.

Lessons:The owners had to involved legal persons at this stage & not wait for auction day, Banks must ensure to try all avenues to recoup their home loan repayment prior to selling the house at an auction, refusing payment was a red flag they should have picked up & acted swiftly

Banks are not in the business of owning properties, they will auction your home if you do not pay them, ensure you do not take debts that you do not have an outright plan on how you are going to pay it off

When building your home cash, ensure that you own the land on which you are building it, always budget for cost overruns, and sign a Turn-Key project if you are not going to actively manage the project, financial mismanagement should be at the builder's expense not yours.

Always Act fast when the bank initiates processes to auction your home, do not hide your head in the sand, get lawyers, attend court cases, do not ignore summons and letters sent to you by the bank, they are building a strong case against you with those letters.

There are cartels who have no regard for the law at the Sheriffs auctions, try your best to find a solution prior to your house going there, they use intimidation tactics that may put your families safety at risk

Your house will almost always be auctioned for less than the amounts you owe the bank, leaving you in a much worse potion,

There is something called the reserve price, that is the starting auction price for your property, do not hold your breath, this amount is usually low, defeats the purpose of having on, in this case, the reserve price was R3.2 Million for an R8 Million house.

Never hand over your hard-earned money to a contractor, especially through a lump sum, hire a project manager and pay the contractor when pre-agreed milestones are reached

Eg pouring of concrete payment of R40 000, building wall at 30% payment of R500 000 & so forth.

Lastly
You will always be in a much better position financially if you sell your house(even at a loss) than waiting for the bank to repossess it, analyze your financial situation and sell if you realize chances of survival are slim, at least you won't be flagged by banks