Row over bank sale of repossessed properties rages on
Homeowners, crippled by economic pressures and unable to pay their bonds, have accused banks of selling their repossessed homes for far less than they are worth, and refusing higher prices or renegotiated payments to secure a quick buy.
Online auctioning procedures controlled by the banks have also come under fire for failing to get the best prices for properties.
Recently, The Mercury published an article about eManzimtoti financial adviser Wilfred Hale, who offered R400 000 for a property on online auction site myroof.co.za, only to have his offer declined by Standard Bank, which then sold it at a public auction for R40 000 less.
Hale followed legal procedure and lodged an official complaint with the bank, giving it 15 days to respond, which it did not do. He then lodged a complaint with the banking ombudsman's Financial Services Board on Thursday.
Standard Bank has 15 days from Thursday to reply to the ombudsman.
More people have since come forward with similar stories of frustration and heartache. An auctioneer told of cases in which banks authorised the selling of homes at auctions for a lesser price than was offered, either before it went to auction or before it was attached.
Stan Farren, who lives in Mtunzini, said he put in an offer on myroof.co.za earlier this year for a Shelly Beach property, with his final bid of R780 000 being the highest.
However, Standard Bank declined the offer and proceeded to sell it at a public auction.
Farren also participated in that auction, and his bid of R725 000 was again the highest. But the bank declined that offer, telling him it had received a higher offer of R780 000 on myroof.co.za. He told the bank that was his offer and it had been declined.
"The bank official was taken aback... He duly came back to me and agreed the bid for R780 000 was my bid, and asked me if I would then pay R750 000, to which I agreed, as I had set my heart on buying this property."
However, Farren said he felt he had been bidding against himself - which was unethical.
Standard Bank did not respond to questions from The Mercury about this case.
Farren followed up with the bank, insisting on an explanation. Its eventual response was that there had been nothing wrong with the sales process.
But it is not only the complications in this process which homeowners are complaining about. Some have reported receiving lower prices for their repossessed homes, while a Durban woman has accused banks of being unwilling to truly help struggling owners.
"Myself, a financial graduate, and my spouse, who has extensive property market knowledge, invested whatever large sums of cash we had in a few high-end residential properties and leased most of them out. We managed to pay the banks their due for a few years," said the woman.
"Then property prices plummeted and simultaneously tenants were not able to afford the asking rentals."
The couple made "a concerted effort" to arrange lower monthly instalments and keep in contact with the banks until they could get fair prices for their properties.
"However, they refused emphatically, placing us under immense pressure and forcing the process to auction."
She and her husband marketed the properties "as soon as we knew we were not able to meet commitments", but all offers presented to the banks were refused. "They went ahead to auction and sold far below bond outstanding and offers received, leaving us with millions in debt."
The woman said one of her properties had a bond of R2.6 million. The bank had refused an offer of R2.1m and proceeded to sell it on auction for R1.35m. She said they now owed the bank R1.7m, with interest and legal fees. This was the case with another two properties.
"As you can see, only with a miracle will we be able to repay the banks in our lifetime. My spouse is still in the property industry and he sees it every day how financial institutions foreclose on homeowners and go to auction, the financial institutions buy the properties in at lower than a bond amount and then sell at a higher price, without passing the difference to the homeowner, who is saddled with huge debts."
South African banks have defended their procedures for selling repossessed homes, saying they only ever look for the best offers and are willing to negotiate with financially distressed homeowners before they are forced to sell.
Standard Bank and Absa, which make use of the online auction site myroof.co.za, have also explained that the processes followed between this platform and a physical auction are aimed at achieving the most positive outcome for their clients.
Standard Bank spokesman Ross Linstrom said that different processes were followed, depending on the situation.
"As with all residential property transactions, not all offers of the same amount are equal.
"The strength of the offer is first the amount and then the ability of the potential buyer to fulfil the conditions of the purchase, like obtaining finance."
Regarding the myroof.co.za process, Linstrom said statistics showed that 80 percent of properties that moved from the online bid auction fetched a higher price at the physical auction.
"Where the offer at a physical auction is lower than the online [rejected] bid, we sell to the highest bidder on the day of auction.
"Similarly, in the ordinary course of buying and selling property, a seller may reject the first offer on their property if the offer is a lower amount than they want.
"The seller will hold out with the hope of getting a better price over time."
When a new offer is presented at a lower price than the first, the seller does not necessarily make contact with the first potential buyer to ask if his offer still stands.
"Neither would they consider trading them off against each other, as time has passed... and the first potential buyer has already been notified of the rejection."
Offers received before auction were considered if they were approved buyers and/or cash buyers with proof of cash in hand, Linstrom said.
There had also been cases where offers were not from serious buyers and were used as a delaying tactic.
Nedbank said it made "every effort" to contact customers who had fallen behind in their repayments, to understand their situations.
"This is important as we need to find the best possible solution to rehabilitate the loan or minimise the losses that the client will experience. Repossession is our absolute last resort, as the financial losses to our clients and the bank are significant," said Amos Kahn, head of legal recoveries at Nedbank Home Loans.
Restructuring payments, allowing able clients to catch up and assisting them in selling their properties, were among the main outcomes sought.
Kahn added that at any stage during a foreclosure process a client could sell his property himself.
"A private sale almost always results in a smaller loss to the bank and our clients. However, if we believe there is little chance of the sale being successful, or if it appears to be a delaying tactic employed by our client, we will continue with the sheriff sale."
Kahn said foreclosure ended with a sheriff selling the property at a public auction, and the law stated it had to be sold on that day to the highest bidder.
Arrie Rautenbach, Absa head of retail markets, said the bank's policy was to keep people in their homes "for as long as is practically possible". He also said not all offers made on homes, even if they were the highest, could be accepted.
"Some are made with guarantees and some without. Offers without guarantees often lapse and a subsequent lower offer (with the requisite guarantees) may be accepted."
FNB spokeswoman Christine Burrows said the bank considered all private offers submitted before a sale in execution.