Simon Bray explains more about the offer to purchase, on the Expresso Show.
Reporter: Let's say I have found the perfect property. I am now ready to make that commitment. What are some of the things that I need to ask before I make that commitment?
Simon Bray: Well, that's the stage that everyone wants to get to, right? You're looking for the property, you spend hours on our website, perhaps looking through tens of different properties, and you finally find the one that you really like. At that stage, you're going to make an offer to purchase, which is really a binding contract between yo, and the seller, provided the seller accepts it. So it can be a particularly difficult process, if you haven't done it before, to understand exactly what needs to go into that contract but really you have to know that you want the house. So is it in the location that you're happy with? Close to schools, the neighbourhood and the community that you enjoy. Sometimes it's worth having rented in that neighbourhood before so you know exactly what you're getting into. Is the house the type of house you want? The space and all of that, and I think most importantly can you afford it, because as soon as you sign that offer to purchase it starts a whole process in motion. And if you can't afford it, well you've wasted your own time and that of the seller.
Okay, now let's say I've cleared my mind of any doubt, I'm a 100% sure this is the property I want to purchase, what do I do?
The best thing to do at that point is to engage with a professional, so an estate agent or an attorney, to draw up a contract for you which is called an offer to purchase. Basically, it records your offer, the price you're going to pay and the terms and conditions that you're happy to accept in a sale. And then it'll get submitted to the seller, and if the seller likes what he sees then he's going to sign it, and you're going to have a binding sale agreement. So it really is just a contracting phase between two parties, and it's important to understand what goes into that contract, what are the various clauses that you need to look out for and that's where an estate agent agent or an attorney can really add value.
And is there anything specific a buyer should be aware of, or at least look out for, before making that offer to purchase?
Absolutely. I mean there are a couple of really important things around the sale agreement outside of what price you're going to pay for the property. A suspensive condition is basically if this condition isn't met well then the sale doesn't go through. So there's usually a number of suspensive conditions inside of sale agreements or offer to purchase, and there are things like you have to get a bond within 30 days, or perhaps I've got to sell my house before I can buy this house. So those would be suspensive conditions, and it's good to look out for those. Another one people often miss is this concept of the Voetstoots clause. There's this misunderstanding in the market that because of the Consumer Protection Act, there's no such thing as the Voetstoots clause. But in an individual property transaction, say you're selling a house to me, that clause absolutely can go into a sale agreement which means you're selling the house to me as it stands. So I need to be aware of any defects and be happy to sort them out if they do present themselves down the line. So that's a good one to look out for. Provided you don't know about any major problem that you haven't told me about, because that would be fraudulent, right? But if you don't know that the geyser is about to burst and the geyser bursts, well then it's the new purchaser's problem. And that's kind of the definition of the Voetstoots clause.
Simon what happens in the event that you've bought the house but people are still occupying it?
The transfer process usually takes about 12 weeks in this country. So specifying exactly when you're going to move in has to be in that Offer to Purchase. So it usually records a date of occupation, and if, as you say, the person continues to live in the place after that date of occupation, then you'd also specify occupational rent. So that's how much rent they would effectively pay you to live in that place. It's usually quite high, it usually has to cover all the costs of ownership for the property. So you do need to look out for those ownership clauses, like the occupational rent clause.
And what are some of those things you should not do after you've done your OTP?
One thing that's really interesting is people will sign multiple offers to purchase. You've seen two or three houses, you've put in two or three different offers, and then you look to get the cheapest one. But the problem is if all of those sellers sign those offers, you've actually just bought three properties. So you don't want to do that. You don't want to sign an offer that you can't get finance for, so you need to know what your affordability level is. And you can't just rely on what people call the "cooling off period". There's a little clause that goes in the contract that says, "If I change my mind in the next five days, then I'm allowed to." That cooling off clause actually really only applies to property below a certain value, usually really low, like R250,000. And those directly marketed. So you don't really want to rely on that clause.