When purchasing a home, most families cannot afford to pay cash for the property and must take a home loan or bond to finance the transaction.

It is important to remember that when a homeowner has a bond (loan) from a financial institution, there is an agreement between the bank and the borrower that the amount borrowed will be paid back on certain terms, example:  within 20 years at 8% interest with an installment of R 5 000 per month.  When a borrower then defaults on payment the bank will have to recover the funds owed to them.

Clients frequently sits in our offices at such a late stage during the process that there is not much that can be done. 

There is a prescribed process that the bank must follow and when you arrive in this situation this is what you can expect:

• The bank will start making calls, messages, sending letters as soon as you miss the first installment.It is important that you communicate with the bank on your situation, and not ignore the bank’s calls.There are several options available at this stage and the bank will be open for discussion and help you as their client as far as possible.Do not ignore the bank as this will be seen as a negative and the bank will move on with legal action immediately, as you are unreachable.
• If no solution is found then the bank will send out a section 129 letter of demand.This is the first step of the legal process. It informs the debtor that they are in arrears for a certain amount at a given date and a person is given ten days to respond.
• After the 10 days passed, the bank will issue summons via their attorney and after the time period thereon, a  judgement order will be granted by the court.The attorney will then apply to the court for the right to auction off the property after which a judge determines that fair and legal processes have been followed.
• The auction date is set, and your home will be auctioned off to the highest bidder at the auction, if the price is acceptable to the bank.This process can be finalized in a very short time frame, and you can lose your home in a little bit more than 3 months.Therefor it is of the utmost importance that you speak up as soon as possible.

It is important to note that at the auction the property may be sold for far less than what you owe the bank, and you will still remain responsible for the balance to the bank.

The question asked by clients is usually whether their homes can be saved from the auction, and as stated there are several options, but the options become less as the time goes by and the auction date comes closer. 

One example is to sell your house privately, where you know you will get a market related price which should be more than the amount at the auction. Your credit record will then also remain clear and when this financial difficulty passes you will be able to start again,

When you fall into financial difficulty, speak to your bank, your family, and your lawyer.  There are ways to reach the other side of this dilemma without as much heartache and keep your credit rating in good shape.