As the offer stands
You've been searching for months. Everything in your price range is either too small, too ugly, too neglected, too far outside the area you'd like to live... and so the list goes on. Finding the right property, at the right price often feels like victory!
Which is why buyers, particularly first-time buyers, are usually very eager to sign the offer to purchase the second it's drawn from the agent's folder of paperwork!
It is exciting and, yes, with covetable, well-priced properties, you need to move quickly, but don't be so hasty that you don't pay careful attention to the terms laid out in the offer to purchase before signing anything.
"It is crucial to understand that a signed offer to purchase is a legally binding document, which means you could be in breach of contract if you then decide differently and can't honour the terms of the contract," says Michelle Cohen, Principal at Leapfrog Johannesburg North East and Sandton. She adds that this kind of misunderstanding could have serious, long-term financial implications for the would-be buyer and seller.
Anecdotally, Leapfrog's trusted property advisors across the country also report that the question around whether a signed offer to purchase is legally binding is one that they are asked most frequently. "There's no need to be daunted by the offer to purchase. Simply make sure you're comfortable with its contents before signing," Cohen adds. The offer to purchase is simply a document outlining the terms of the sale and purchase of a property, with the purpose of ensure that both parties are in agreement about various matters concerning the property.
Pay careful attention to the following terms, specifications and clauses in the document before putting pen to paper.
Conditions of sale
Both the buyer and the seller stipulate conditions in the offer to purchase. Typically this sections states that the purchase is subject to finance and bond approval on the part of the buyer, or subject to the sale of another property, or even to the outcome of specialist inspection approvals, explains Cohen.
The clause that states that the sale is dependent on bond approval should allow a realistic time frame for this to be achieved. Where this is the case the potential buyer should notify the property agent as soon as the home loan is granted in order for the offer to purchase to become valid and to set the process in motion. Be cautious and ensure that the time frame given for any deposit or cash payment is realistic and that you have sufficient time to notify your bank to release the funds. Money that is on 32 day notice account (or similar) can only be transferred after the notice period is up.
Fixtures and fittings
The rule of thumb is that items that are fixed to the surface of the property, such as burglar bars and safety gates, are included in the purchase price. Movable items, like curtains, mirrors and garden pots, are generally not, unless specified, and would thus be removed by the seller.
It is not uncommon for the buyer and seller to come to an agreement about fixtures and fittings that have been custom-made for the property to stay, or pieces that add to the specific aesthetic of the property.
"Whatever is decided, make sure you have it in writing to avoid confusion or unhappiness further down the line," Cohen cautions.
The buyer and the seller need to agree on the date when the house will be vacated by the seller so that the buyer can move in. Most buyers and sellers usually need to make various moving arrangements so it is helpful to determine and clarify this date well in advance.
In the event that the buyer needs to move into the property before it has been transferred and registered in their name. Conversely, it also applies when a seller remains in occupation of the property after it has been registered and transferred to the new owner.
"Very simply, it is compensation for the use of a property that you're not the owner of, and will only be occupying for a short-term period," Cohen clarifies.
Industry accepted practice is that occupational rent should amount to more or less the same as ordinary rent would be for the particular property, but the parties involved could negotiate a better deal.
The purchase price is the most important stipulation in the offer to purchase document. The price offered by the buyer should be clearly stipulated, together with a time frame within which the seller need to accept, reject or negotiate it.
Also make sure you're acquainted with the clauses that stipulate the commissions to agents, the expiry date of the offer and the need for various compliance certificates.
Lastly, take care to ensure that any verbal discussions and decisions to change anything in the contract is put in writing and signed by all parties. A verbal discussion or agreement is not binding.
Familiarising yourself with the offer to purchase not only allows for the buying and selling process to run more smoothly, but also protects the parties involved against hassles that may arise later on.
Author: Leapfrog Property Group