Buying property: offer to purchase

You have done your research and checked your credit rating, gone house hunting and found the home of your dreams – now what? It is time to fill out the paperwork and make an Offer to Purchase. For many home buyers this may be a daunting task and the ins and outs of making an offer could be vague.

Adrian Goslett says, fundamentally, an Offer to Purchase is an agreement that contains the terms and conditions of the property transaction. “The terms and conditions must be agreed upon by the buyer and seller of the property on a number of issues before the document is signed. Everything that is agreed upon by both parties must be listed in the Offer to Purchase document.”

Goslett says the Offer to Purchase must contain in writing all the terms on which the parties have agreed. This should cover things such as the date of occupation, occupational rent, fixtures and fittings and the conditions of sale. Once the Offer to Purchase has been concluded and signed by both parties it will become the Deed of Sale on that property.

The more specific an Offer to Purchase is the better. If all aspects of the sale have been covered and written into the document, he says, there will be very little room for either the buyer or seller to negate anything at a later stage.

“For example, certain curtains or furniture may have been specifically manufactured for that particular home, so it would make sense for the seller to include those items with the home. However, if those items are not listed in the Offer to Purchase, the seller has no obligation to leave them.

“If the document is particular in its detail, there is less confusion down the line on what was promised and what was not,” says Goslett.

It is important that both parties agree on what stays in the home and what goes with the previous owner. As a general rule, anything that is nailed, glued or screwed down has to stay and everything else can go.

In some cases buyers may make an Offer to Purchase while they currently own an existing property or it may be made subject to the buyer obtaining the necessary finance.  In these instances, the Offer to Purchase may include a suspensive condition that the sale is subject to the bond approval or the buyer’s current property being sold. While the bond approval condition usually includes a time limit of seven to 10 working days, the time limit for the buyer to sell his home has to be agreed upon. Once the buyer has received confirmation that the mortgage has been approved or that his home has been sold, he must notify the agent immediately to ensure that the offer becomes unconditional. This is a vital part of any property transaction, because if the Offer to Purchase falls through, the entire agreement will become null and void.

According to Goslett an important aspect that should be covered in the Offer to Purchase is the date of occupation. This is the date that the property will be vacated by the seller so that the buyer can take occupation. It is essential to clarify this date so that both parties can make the necessary moving arrangements. The date of occupation will have a bearing on whether the buyer will have to pay occupational rent. This is the rent that is paid to the seller by the buyer if they have taken occupation before the property has been registered in the new buyer’s name.

Goslett says that this works both ways, in that if a seller has to stay in the home after the home has been registered, he would have to then pay occupational rent to the new buyer. This rental price can be agreed on by both parties with the help of an agent.

He says that buyers need to be absolutely happy before they conclude the Offer to Purchase, because once it has been signed and accepted by the seller, they will be contractually obligated to that transaction. Buyers must read each section of the contract carefully and make sure that they fully understand what the document is saying. If they are unsure of any clause in the document they should ask their agent questions to clarify and make sure. If further clarification is necessary, buyers could request that their lawyer read it and give advice where necessary.

Once the document has been signed, all negotiations have been concluded and any relevant cooling-off period has passed, the buyers deposit should be placed into an interest-bearing trust account until transfer of ownership is complete. The interest on this account will be for the benefit of the purchaser.

“The primary objective of an Offer to Purchase is to make the buying and selling of property as transparent as possible. If understood by both parties and used correctly, the Offer to Purchase is an invaluable part of any property transaction,” says Goslett.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za

Putting in an Offer to Purchase

Normally, once you have seen a property you like, an estate agent will help you draw up an “Offer to Purchase”. This document contains all the terms and conditions of the sale, the purchase price, the payment terms, the date you will take occupation of the property, and the occupational rent. Occupational rent is a monthly amount paid to the seller by the purchaser to occupy the property prior to the date of registration of transfer of the property into the name of the purchaser. Alternatively occupational rent could be paid by the seller to the purchaser if he/she needs to continue occupying the property for a period after registration of transfer. In the absence of an Estate Agent an attorney can assist the parties in reaching an agreement in this regard – alternatively a standard “offer to purchase can be bought at CNA. It is always advisable to have an Attorney draw up a final agreement once the buyer and seller have agreed upon a price as this can prevent problems at a later stage.

If you plan to take out a home loan, the “Offer to Purchase” must include a condition that the sale is subject to bond approval being obtained within a realistic amount of time i.e. 7 to 10 working days. Once you have confirmation that your loan has been approved, you must notify the seller immediately to ensure that your offer becomes unconditional and to enable the process to continue. This condition is very important, because if you are not able to secure finance, the “Offer to Purchase” will terminate and become null in void, and neither you nor the buyer will be liable to pay any costs or penalties.

The Offer to Purchase should also include details of any unusual fixtures or fittings which are included in the purchase price, or which the seller might want to take with him when he leaves. Generally all items which are “fixed” remain in the house, but furniture, loose carpets and appliances go with the seller. This is where conflicts often arise, so it’s best to ensure any important items are noted in the contract.

Take the time to find out everything you need to know about a property before signing anything. Visit the house for a second look, you may have missed something the first time. Always express your concerns to the seller and ask them to assist you in clarifying any problem areas that you may have or consult an Attorney. Once the seller has accepted and signed the offer, it becomes a contract binding on both parties.

Please contact us if you require any further information or would like to apply for finance:

Complete this short form online

011.327.4489 / 0861 1111 93

morne@mortgagepluscc.co.za

www.mortgagepluscc.co.za