Once signed by both the buyer and the seller, an Offer to Purchase (OTP) a property becomes a legally binding contract. A “cooling off period” applies only to property purchases below R250,000, and a buyer can therefore not simply "pull out of the deal" without potential legal and financial consequences, unless specific conditions allow for it, according to agents from the Seeff Property Group.
Once the offer is accepted, it should generally be fairly smooth sailing from here, but that is not always the case. More often than not, there are conditions (suspensive conditions) attached to the offer which need to be fulfilled. While there may sometimes be issues with “buyer’s remorse” or “seller’s cold feet,” which could cause the deal to collapse, it is often due to these suspensive conditions, or unforeseen issues which may arise during the process.
Seeff highlights six of the most common reasons why property transactions fall through:
1. Buyer cannot secure a home loan or shortfall is too big to fund
This is one of the top reasons since most buyers rely on finance. If the buyer's loan application is rejected due to affordability or credit issues, or the buyer cannot fund the shortfall, the sale will likely collapse. This is a standard suspensive condition in most OTPs.
2. Sale is contingent upon the buyer selling an existing property
This is often the case where the buyer must first sell their property, or needs to sell for a particular price. If the buyer’s existing home sale fails to sell within the stipulated time, the offer becomes null and void.
3. Seller fails to complete agreed-upon actions (such as repairs)
Buyers often stipulate certain conditions which must be met before transfer of the property. If these are not completed to their satisfaction or within the agreed time, the deal will likely collapse.
4. Required Certificates of Compliance are not obtained
Electrical, gas, electric fence, plumbing, and other compliance certificates are legally required before transfer. If the seller fails to obtain these within the agreed time, the buyer may withdraw or renegotiate, and if no agreement is reached, the sale could fail.
5. Property defects and disclosure disputes
While sellers are obligated to disclose known defects, hidden issues can emerge during due diligence or inspections. If significant, undisclosed defects are discovered, buyers may withdraw their offer or demand a substantial price reduction, which could collapse the transaction.
6. Incomplete or incorrect planning approvals or illegal structures
For a legal property transfer, all structures need municipal approval. Discovery of any unapproved or illegal structures could cause significant delays and costs, potentially requiring demolition. These issues often cause the buyer to withdraw from the deal.
