Repossession of a home can occur when a financial institution takes legal action to seize and sell the property of a debtor who has defaulted on their loan repayments.

Usually this happens once a debtor has repeatedly missed payments and not responded to the bank’s written requests to remedy the situation.

It’s advisable for a homeowner to immediately communicate with the mortgage holder if they find themselves in a financial predicament. Repossession would be a bank’s last resort, and they might be amenable to restructure the loan and give the debtor a “payment holiday” until his financial predicament has been resolved.

But if a sale in execution cannot be avoided, this is the process:

• It typically begins with the bank sending the debtor a letter of demand, informing them of their default and requesting them to bring their payments up to date. If the debtor doesn’t respond or make the necessary payments, the bank may start legal proceedings to repossess the property.

• To obtain an order for repossession, the bank must provide evidence to the court that the debtor is in default, that a mortgage bond is registered over the property as security for the debt, and that the repossession is necessary and fair. The court may also consider any defences or counterclaims raised by the debtor. But if the court grants the order for repossession, the creditor (the bank) has the right to take possession of the property and arrange for its sale.

• The sale proceeds will be used to pay off the outstanding debt. Any surplus funds would be returned to the debtor. But if the sale proceeds are not sufficient to cover the amount owed, the debtor may be held liable for the shortfall.

The downside of a property being sold by public auction is that it may not realise more than what’s owed to the bank. It is highly likely that a private sale would achieve a higher price. That alone is a good reason to avoid a repossession sale.

It’s important to note that the repossession process must comply with certain legal requirements and procedures to protect the rights of the debtor. For example, the creditor must give the debtor notice of their intention to repossess the property and may not use force or intimidation to gain access to the property. The debtor may also have the right to defend against the repossession through legal means.

Both the creditor and the debtor should seek legal advice to ensure that their rights and interests are protected throughout the repossession process.