Getting on the property ladder buying Properties in Possession


Are you considering investing in property? Are you thinking about getting on the property ladder by investing in Properties in Possession (PiPs)? Then look no further. We have top tips to help you navigate your way!

Buying a PiP or home that has been repossessed by a bank may seem like a good idea as these properties are often available for less than the market price as banks often only want to recoup their losses with a sale rather than make a profit.

You may also find that banks offer incentives to buy PiPs, such as offering preferential interest rates on home loans, lower bond registration and legal fees, and no transfer duty payable on the property as the property is owned by the bank and the bank is thus liable for Value Added Tax (VAT).

Private Property asked us to compile some tips to help you as you navigate your way through the process of buying repossessed houses for sale.

1. Enlist the help of a knowledgeable professional

It may seem unnecessary but bringing in someone who knows their way around the business can help you to identify possible pitfalls and defects with the property.

2. Do a cost evaluation of what improvements need to be made

One of the drawbacks of buying a repossessed property is that it may be neglected. When you bring in the help of a professional, they will also be able to point you in the direction of contractors who can help you assess whether the price you are getting the property at is actually a bargain, or if you will use the money you save on improvements.

3. Investigate the area

If the house has been on the market for a long time, then it may be as a result of the area being in decline and there is little demand for property there. Investigate whether the area is safe and find out if there are external factors that could negatively impact the value of the property further down the road.

4. Find out from the bank how it arrived at its asking price to get the best deal

Factors that could impact on the bank’s asking price include having to settle large municipal debts left over from the previous owner, and what the bank spent on holding costs such as rates, maintenance and security. The longer the property has been in the bank’s possession, the more these factors will come into play.

5. Find out whether the property is occupied or not

If you are looking to rent out the property and there are already tenants, you may not have to look far. However, if you have other plans for the property, then it may become a legal battle to have the current tenants evicted.

6. Make sure you know what is on the title deed

Ensure that you understand what, if any, restrictions or servitudes apply to the property. As the buyer, this responsibility lies with you.

7. Get pre-approval for your home loan

A pre-approval on a home loan will help you know what amount you qualify for, as well as save time in the transaction process, which could give you an advantage over other buyers.