Author : Homeloans SA
Making an Offer To Purchase
The Offer to Purchase is not only an important milestone in any property transaction, but also constitutes an important document – one that should not be taken lightly at all. You see, the Offer to Purchase, once signed, constitutes a Deed of Sale; it forms the foundation of all the legalities going forward, and could mean the difference between a smooth transaction and an unwanted lawsuit.
Here are some of the things you may want to consider, regardless of whether you are the buyer or the seller, when you do a review of an Offer to Purchase:
Basic Details Check
First check all the basic information on the Offer to Purchase.
1· Date of offer: This is especially important if deadlines (such as termination of offer) are defined in relation to this date.
2· Parties: These are the details of both the buyer and the seller.
3· The property description: Specifically check the erf number and the property address.
4· The price offered. It should be correctly written.
5· Commissions: The exact amount should be reflected in the offer.
Over and above the date of the offer, there are two more dates that you should check:
1· Offer Expiry Date: This date is usually included to place some pressure on the seller to make a decision. If the seller does not accept an offer by the expiry date, the offer becomes null and void.
2· Occupation Date: This date refers to the date on which the buyer wishes to occupy the premises and could be earlier than date of transfer.
If the buyer wishes to occupy the property prior to transfer, the seller is entitled to charge the buyer occupational rent. The amount should be clearly detailed. Also check that the clause includes a provision that, should the transfer be finalised earlier than the date when an occupational rent payment falls due, that the amount due will be prorated.
Should the buyer pay a deposit as a sign of good faith, the Offer to Purchase needs to state that amount and that the deposit will be held in an interest bearing trust account until transfer. It also needs to state that the buyer will be entitled to receive the interest earned when the deposit is finally released.
Fixtures and Fittings
Although fixtures and fittings are deemed to be a part of the property as a whole, there may be some items, such as curtains or mirrors, that the seller and the buyer agreed would be included in the purchase price. If this is the case, you should list these separately.
Defects, faults and renovations
Property is normally sold ‘voetstoots’. The term means that you buy the property warts and all. If there are defects, faults and renovations that the seller agreed to repair or complete as a condition of sale, these should be listed comprehensively.
An Electrical Compliance Certificate is required by law. The buyer could however request that additional certificates be provided, such as engineering reports and reports on pests. These additional certificates need to be listed.
Although a cooling-off period is generally enforced on properties with a value of R 250,000 or less, it can be legally included in property of a value greater than that. The premise is that should both parties agree to the inclusion of such a clause, it will be legally enforceable. Check the duration of the cooling-off period. It should be no longer than five days.
Suspensive conditions are the conditions on which an Offer to Purchase is based. These could include:
1· Ability to secure a home loan for the purchase amount.
2· The sale of the buyer’s existing property
3· An assessment of the property to be bought. This assessment could include the structure, floods, damp and pests, among others. The Offer to Purchase needs to state who will foot the bill of the assessment.
Each of these conditions should have a due date attached to it. Be sure to check that too.
72 Hour Clause
A 72 hour clause is often included in an Offer to Purchase to allow the seller to continue marketing the property after an Offer to Purchase, which is subject to suspensive conditions, has been accepted. Should the seller want to accept an alternative offer from another buyer, he or she will notify the existing buyer in writing, after which the buyer will have 72 hours to fulfil the suspensive conditions on the original Offer to Purchase. Carefully check the wording to ensure that the clause is equitable.
The internet abounds with free Offer to Purchase templates. Regardless of whether you use one of these, or a template supplied by your estate agent, remember that you can make adjustments should you need to. If you are uncertain about anything related to the document, it would be wise to rather solicit a professional legal opinion. The amount you will need to pay for this counsel is negligible when compared to the overall value of any given property.