Once you have found your dream home, it’s understandable that you may want to put in an offer as soon as possible. But be very careful - an offer to purchase (OTP) document is a legally binding contract. This means that once you sign the OTP, you cannot easily change it.
WATCH : Important clauses to know in an offer to purchase document.
The sellers can accept your OTP, decline it, let it lapse by doing nothing, or return it with changes as a counteroffer. Then you can accept it with the changes, decline it, do nothing or send it back with your counteroffer. However, even if your offer is accepted with conditions, you cannot change it without agreement from the sellers.
Before signing, it’s essential that you read the OTP agreement carefully and make sure you understand all the terms and conditions. If anything isn’t completely clear, get the estate agent to explain it, so there are no misunderstandings. If necessary, ask your attorney to read through the document and clarify any grey areas.
If you are buying an existing home, having the property inspected before making an offer can be a good idea - even if you have viewed the property a few times before deciding to buy. Sellers are legally obliged to disclose all known defects, but there may be some that they are not aware of that could cause headaches in the future.
Checklist
These are some of the items you need to check in the offer to purchase document before signing:
- Does the property description in the OTP correspond with the title deed?
- Are all the buyers' and sellers’ details correct?
- Is the purchase price written correctly?
- Are you happy with the occupation date and occupational rent amount, if applicable?
- Are there any suspensive conditions. For example, the agreement may be subject to the buyers’ bond being approved or the sale of another property.
- If there are suspensive conditions, is the time period for these conditions to be fulfilled feasible?
- Are all movable items that should remain with the property listed? Examples could include pool cleaning equipment and window blinds.
- Is the estate agent's commission correct as agreed?
The 72 hours clause
If your OTP contains a suspensive condition, such as being subject to the sale of your existing property, it will probably also contain what is known as the 72 hours clause.
For sellers, suspensive conditions can cause frustration, as the sale process will remain undecided while they wait for these conditions to be fulfilled.
The 72-hour clause entitles the sellers to continue to market the property - even after accepting your offer to purchase.
If the seller receives a better offer, they can provide you with a written notice informing you that they are invoking the 72 hours clause, which means you only have 72 hours within which to meet the suspensive conditions. Failure on your part to comply will nullify your offer to purchase, freeing the seller to sign a deal with the new buyer.
Finances
Your offer to purchase should be based on the selling prices of comparable properties in the area. It should also consider the location, the home's condition, and any extras included. The estate agent marketing the property you want to buy should be able to help you prepare a reasonable offer.
Before you even start looking at properties for sale, be sure your finances are in order. Ensure that the funds to be set aside for your deposit, as well as the bond registration and transfer costs, will be ready by the time they need to be paid.
You should also get pre-approval for your bond from a bond originator, such as ooba or BetterBond. This will give you a good indication of the price range you should be looking in.
You can use the insights outlined above to ensure that the offer to purchase works to your advantage rather than your disadvantage.
Writer : Sarah-Jane Meyer
