Auctioning property not the way out

 Nine pages in Daily Nation, four in the Standard.

All real estate set for auction.

This has been the story for days on end for some time now.

As the economy tanked, many individuals and businessmen found themselves in that deadly trap everyone hopes never gets to them--their property being auctioned. It is painful enough to see something you have worked for forcefully taken from you.

For some, they are well past the half way mark towards full ownership of the property. For many, it is of no fault of their own. A poorly managed economy, inflated property prices, greedy banks and employers looking to remain a float has brought us here.

Take the case of James* (names changed to hide identity) who was laid off sometime last year. He was 2 years away from owning a 3 bedroom bungalow along Kangundo road worth Sh6.5M. After the moratorium lapsed, the bank came calling.

Needless to say and painfully so, the house was auctioned a few weeks ago. It appears that bankers internally colluded to have the property auctioned as fast as possible....but that is a story for another day.

Jane* was lucky. Her property went as far as the hammer but none of the bidders had cash to match what the bank wanted for mortgage arrears. The property in Kileleshwa has since been reverted to the bank and a 30 days grace period granted for her to raise the cash.

The property market finds itself in a very unique position. After an extra ordinary boom and denial on the bubble bursting, the reality is here.

Sales are flat. Rental income is falling and property prices are bottoming out. For anyone with cash, this is a good time to buy and build their asset base. Unfortunately, most people don’t have the cash.

A combination of the effects of corvid restrictions on an economy that was already on its knees has seen businesses shutdown, individuals laid off and salaries cut. Individuals and businesses that had acquired property through loans and who are defaulting has gone up significantly. The level of properties facing auctions continues to rise by the day.

Auctioneers are holding property upon property whose owners have defaulted on payments but with no one to buy.

A combination of overpriced properties and stubborn landlords in denial of the current realities is ensuring that the price correction--which was coming anyway—is not happening at a rate to match what the 'free hand' of the economy is dictating.

Which way now?

Landlords, bankers and auctioneers need to snap out of the denial state they are in. The market needs to witness property price corrections reflective of the current realities. Rent de-escalation needs to conform with what the economy is saying for all parties to wade through this situation and wait for a better day.

Rent, mortgage payment holidays, use of facilities at no charge, removal of service charges and other such measures that make it easier for business and individuals with changes in incomeneed to kick in in earnest.

If you are caught in this scenario, this is what you could do. Approach the financiers and explain the change in income position. Argue out for a payment plan that works for both parties. Better still, request for a monthly repayment holiday as you put yourself together.

In other words, request for a private treaty.

A private treaty is where a property facing foreclosure is advertised as being on the market and prospective buyers make their offers directly to either the seller or their agent instead of the bank or auction.

This gives the owner of the property to try and sell the property and offload the loan due without necessarily being auctioned and salvage a few shillings to start a fresh.

Property prices--like the Kenyan shilling exchange rate—have remained artificially high and cannot be supported for long if corvid continues. It is about time to re-look the auctioning as a way of recovering finances. Perhaps it is time to try negotiated payment plans benched on the current economic realities.

The period before which a property is listed as auctionable needs to be extended to give the individuals more time to organize their sources of income after being smacked by corvid.

Lastly, house prices and rents need to reflect the current economic realities. Landlords need to wake up to this fact. It is better to review pricing and rent downwards and make a sale or host tenants as opposed to having empty houses or no sales.

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At PROPERTY & DISCOUNTS LTD, we assist buyers facing changed income positions or certain misfortunes to sell their properties to address the issues at hand, be it a bank loan, a school fee or medical emergencies at the shortest time possible. We have a list of bargain hunters looking for good deals in the market.

We also assist landlords acquire tenants.

Try us today. Call/Whatsapp 0720595077