ABSA buy a plot on auction from themselves for R1000

ABSA sell plot to themselves

Recently it came to our attention that ABSA had auctioned of a consumers property for R1000 to…ABSA.

The plot is around an acre in size. It seems that the reserve price on the plot was only R1000. This happens then to be the price ABSA paid. This is a really good deal since the consumer (Mr Mashuni) had borrowed money from ABSA to buy the same plot previously for R250 000.

What a bargain.

Now it seems that ABSA will sell the plot (hopefully for a bit more than R1000.) Sadly the consumer is out of pocket by R249 000

Essentially when the consumer got into trouble and after ABSA turned down an offer from the consumer to try sort the matter out the proceeded to auction. ABSA held an auction and because no one showed up who wanted to buy the plot they bought it themselves. This in fact is quite a common practice across the various banks. What is a bit concerning that the reserve price was set so low. When contacted for information about how reserve prices are set the attorneys answered that it is the bank itself that set the reserve price and that such information is naturally confidential. It seems in this case the reserve price was set below R1000 (on a R250 000 plot).

This just demonstrates why it is a dangerous idea to ever let a bank auction off your goods and why it would be better to do so yourself. The reserve price that the bank set it at might be ridiculously low and not be market related in anyway. This will mean that you could be left with a huge shortfall which you will have to pay over the next 30 years of the judgement. Normally the creditor does not actually get much of this “shortfall” money back but they are also able to balance their accounts, claim on insurances and of course make some money back on the sale of the asset.

But why did no one show up?

The attorneys who acted on ABSA’s behalf in this matter inform us that the auction was advertised as normal in the Government Gazette and in local newspapers. It seems though that no one showed up for the auction. This just goes to show that if you have property that is to be auctioned off it is always a good idea to get family to attend and bid. In this case a family member could have bought the same plot which the consumer paid R250 000 for only R1000 (if ABSA had not tried to outbid them). Also it is important for consumers to supplement the advertising processes of the bank in regard to letting people know about an upcoming auction. This might help them to avoid a MASSIVE shortfall as has happened in this case.

At present this matter has caught the attention of some parties who are asking is it possible to sell off a R250 000 plot for only R1000 to yourself and be acting in compliance with the law. Further investigation will follow and Debtfree will try keep you posted.