- An Offer to Purchase is legally binding, and cancelling one will usually incur penalties.
- However, if certain suspensive conditions aren’t met, the Offer to Purchase can be cancelled without penalties.
- Be sure to get prequalified, so you know what you can afford before signing an Offer to Purchase.
An Offer to Purchase is supposed to be legally binding, and is thus designed to be difficult to renege on. So you should be confident in your ability to acquire funding for a home purchase before committing to one.
That said, people do change their minds, and you’re not going to be thrown in prison if you break the agreement. You will, however, have to pay some significant penalties, although there are circumstances under which you could withdraw an Offer to Purchase without being penalised.
Here are some scenarios that allow for the lawful cancelling of an Offer to Purchase.
The offer is less than R250 000
In order to protect low-income buyers, the law allows for a buyer to cancel the offer if it amounts to less than R250 000, but only if a written notification is provided to the seller within five days of signing the Offer to Purchase.
It is a short window of time to make a critical decision, but it is one of the few opportunities a buyer has to withdraw from an Offer to Purchase without having to concern themselves with any of the terms or conditions.
A condition of the agreement is not met
This is the usual reason for pulling out of an Offer to Purchase, and it’s why buyers are advised to include certain suspensive conditions in the agreement. For example, the buyer can include a condition that stipulates the agreement will only go ahead if they’re able to obtain finance for the purchase by a certain date.
This is a way for buyers to protect themselves financially, although it might make the seller more reluctant to commit to the agreement. You should probably try and find out whether the seller is getting other offers for the home before including a bunch of conditions; they may just decide to sell the home to someone else instead.
Furthermore, if you’re unable to meet a condition, you have to be able to prove that you aren’t able to meet it, and that you at least made an effort. So don’t see it as an easy escape clause.
What if the seller breaks the terms of the contract?
If the seller deliberately fails to meet a condition of the agreement, then the buyer is not only entitled to cancel the Offer to Purchase; they’ll be able to claim damages as well.
Before you sign the Offer to Purchase…
It should be clear that cancelling an Offer to Purchase is tricky, and that you’re better off ensuring your finances are in order before committing to one,
For example, getting yourself prequalified is an effective way to provide peace of mind. The prequalification process determines what you can afford based on your financial situation.
You can get prequalified using ooba Home Loans’ free, online tool, the Bond Indicator; or by contacting a representative at ooba Home Loans.
Prequalification will also make your offer more attractive to the seller, as you’ll be able to prove to them that you can afford the purchase.
We offer other tools that can be of assistance, should you be interested in purchasing a property. For example, our Bond Calculator will determine the home loan you qualify for, and how much you can expect to pay monthly on your bond repayments.
We also improve your chances of acquiring financing for the home purchase, as we can submit your home loan application to multiple banks, casting a wider net and giving you the opportunity to compare the packages they offer.
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