In a significant shift in the real estate market, banks in Kenya are increasingly partnering with estate agents to sell distressed properties. Traditional auction methods, long the staple for disposing of defaulted loan assets, are proving less effective in the current market, prompting financial institutions to seek new strategies.
Historically, auctions have been the primary means for banks to recover loans by selling off properties of defaulting borrowers. However, a saturated market and hesitant buyers have rendered this approach less fruitful. Potential buyers are often wary of auctioned properties due to perceived stigma and lack of transparency, leading to fewer successful sales and lower recovery rates.
“Auctions are not achieving the recovery rates we need,” said a senior banker at one of Kenya’s leading financial institutions who preferred to remain anonymous. “The market is saturated, and potential buyers are hesitant, partly due to the perceived stigma attached to auctioned properties. By collaborating with estate agents, we can reach a broader audience and present these properties in a more favorable light.”
Estate agents are stepping in to bridge this gap, using their marketing expertise and extensive networks to find buyers for distressed properties. This approach not only helps banks recover their loans but also supports the overall stability of the real estate market.
“Working with banks on distressed properties allows us to offer potential buyers a more transparent and less intimidating buying process,” said Mwangi, an estate agent in Nairobi. “We can provide detailed property information, organize viewings, and negotiate better terms, which is often more appealing than the traditional auction route.”
The shift towards estate agent partnerships is seen as a mutually beneficial arrangement. For banks, this means a higher likelihood of recovering loan amounts. For buyers, it offers a more accessible way to purchase properties that might otherwise be out of reach.
“Estate agents bring a level of professionalism and market knowledge that is crucial in today’s challenging economic climate,” remarked Mwangi. “This partnership could potentially revitalize the market for distressed properties and provide much-needed liquidity to the banking sector.”
The trend is gaining momentum as more banks recognize the advantages of this approach. Estate agents are now leveraging their industry knowledge and marketing skills to attract previously reluctant buyers of distressed properties, making the sale process smoother and more efficient. Additionally, estate agents are seen to offer buyers a sense of security and transparency that is often missing in auction settings.
Several banks have already reported improved outcomes since adopting this strategy. Properties that remained unsold through auctions for months are now finding buyers within weeks. This success is encouraging other financial institutions to consider similar partnerships.
“Estate agents are very good at navigating the complexities of the real estate market,” noted an estate agent who has successfully sold multiple distressed properties. “They understand buyer preferences and can tailor their marketing strategies to highlight the positive aspects of these properties, making them more attractive to potential buyers.”
“We are seeing a more dynamic and responsive market as a result of these collaborations,” said the agent “It’s a proactive approach that addresses the root causes of the problem rather than just the symptoms.”
