The Offer to Purchase: 5 Things to know before signing on the dotted line
Category Property News
The Offer to Purchase: 5 Things to know before signing on the dotted line
With your bond pre-qualification done - the process that stipulates the home loan amount you qualify for - you're confident that it's just a matter of time until you find your dream property. Which you do, of course, but there are 27 other people at the viewing, and it appears that they are all as keen as you are to make a move on this one that you've just lost your heart to.
Fastest fingers first, you think, as you urge the estate agent to hand you the Offer to Purchase to sign straight away. Good luck to the 27, you've got first dibs on that place.
Unfortunately, it is not quite that simple, Carl Coetzee, CEO of BetterBond, cautions. "While the offer to purchase solidifies the intention to purchase, it is essential to understand what a signed Offer to Purchase means - for both the buyer and the seller."
It's crucial to familiarise yourself with the various terms and conditions laid out in the Offer to Purchase so that you can be confident that you will be able to honour the terms of the agreement. "We always recommend that people go through the Offer to Purchase with a fine tooth comb and to raise questions and concerns before signing on the proverbial dotted line as this is a legally binding document," Coetzee points out.
A misunderstanding or a misinterpretation around the contents of the Offer to Purchase could have serious financial implications for both the buyer and the seller. "Having said that, there is no reason to be intimidated by the Offer to Purchase; the important thing is simply to ensure you have a thorough understanding of the information contained in the document," Coetzee reasons.
Quite simply put, the Offer to Purchase is the contract defining the terms and conditions of the sale and purchase of a property, which seeks to ensure that both the buyer and the seller are in agreement on matters related to the property.
1. Conditions of sale
The conditions of sale stipulates that the purchase hinges on the buyer's financial position and bond approval, or that the purchase is subject to the sale of another property.
Coetzee explains: "If the transaction is dependent on bond approval make sure the time frame allowed for this is reasonable. Here, again, it is useful to have a pre-qualification certificate as this increases one's chances of having the bond approved before another potential buyer. As soon as a buyer's bond is granted, the Offer to Purchase becomes valid and the transaction process is set in motion."
2. Purchase price
Naturally, the purchase price offered by the buyer is a very important clause in the document. There should be a time frame attached to it, to signal by which time the seller needs to accept, negotiate or reject the offer.
3. Fixtures and fittings
So it was the chandelier in the main bedroom or the large terracotta pots on the stoep that finally convinced you about the appeal of the property? Best to make sure then that it doesn't move with the seller!
When it comes to what stays and what goes, the general consensus is that items that are secured to the surface of the property, thus fixtures, including safety gates, light fittings, burglar bars, are included in the purchase price. Fittings, on the other hand, refer to movable items such as garden furniture, curtain rails, mirrors, floating shelves and the like, are understood not to form part of the purchase price. The buyer and the seller may however specify what stays and what goes, and it is not uncommon for the two parties to negotiate what goes and what stays. "Make sure any specifications in this regard are noted in writing to avoid disappointment later on," Coetzee suggests.
4. Occupation date
Simply the date on which the property will become vacant and thus ready for occupation by the new owner, the occupation should ideally be agreed upon by both the buyer and the seller. "Since it is likely that both parties have a lot of arrangements to make, it is a good idea to settle on a date well in advance and to note that down in writing," Coetzee recommends.
5. Occupational rent
It may happen that the buyer moves in before the transfer and registration of the property has taken place, or that the seller needs to remain in occupation after the property has been transferred to the new owner. In an event like this, occupational rent will be paid by the party to whom the property is not yet or no longer registered. As such, occupational rent refers to the compensation paid for living in a property that is not yours, and it usually implies a short period of time.
Coetzee elaborates: "The industry standard is for the occupational rent amount to be similar to the rental the particular property would fetch on the open market. As with other aspects of the Offer to Purchase, though, the two parties are free to negotiate a deal that suits both. Just make sure it is noted in writing and added to the Offer to Purchase as an addendum." Move quickly, but be thorough
When you see that property that just speaks to you, you tend to feel a sense of urgency to sign the Offer to Purchase as soon as possible. It's true that you need to move quickly when you find the one that you love in your location of choice and comfortably within your price bracket, but it's equally important to understand that an Offer to Purchase is a legally binding document which means that, should you backtrack once it is signed, you could be in breach of contract.
Author: BetterBond
