- An offer to purchase offer is a legally binding contract; once you sign it, you cannot easily change it.
- As a prospective buyer, you should make sure your finances are in order and obtain bond pre-approval before making an offer.
- Read the purchase agreement carefully to see what’s included in terms of fixtures (attached to the property) and chattels (not permanently attached).
- While the seller should disclose all known “faults”, it’s still important to have the home inspected before making an offer.
You’ve found your dream home, and you want to make an offer and sign on the dotted line right there and then. But less haste, more speed is always the best route to go, advises Rhys Dyer, CEO of ooba home loans, South Africa’s largest home loan comparison service.
“Far from being simply an agreement, an offer to purchase is a binding contract; once you make an offer, you cannot easily change it,” he explains. “The seller can accept it, decline it, let it lapse by doing nothing, or sign it back with changes, as a counter-offer. Then it’s your turn to accept it, decline it, do nothing or sign it back. But even if your offer is accepted with conditions, you can’t change it unilaterally.”
Things to do before signing an offer to purchase
Dyer suggests prospective buyers consider the following three steps before signing an offer, to ensure that the purchase goes as smoothly as possible:
1. Make sure your finances are in order
Offer prices are generally based on what comparable properties in the area have sold for, taking into account the home’s condition, location and any extras included; an estate agent can help you prepare a reasonable offer. “When you’re ready to make an offer, be sure you’ve already obtained bond pre-approval in the price range that you’re talking about,” Dyer advises, explaining that a home loan comparison service can help you with this crucial step. “Also, ensure that the funds you need to set aside for your deposit and the transfer and bond registration costs will be ready by the time you have to pay it,” he adds.
2. Understand everything you’re signing
Make sure you read the offer to purchase carefully to see what you’ve agreed to buy, Dyer says. “Pay special attention to the section in every agreement that lists fixtures (attached to the property, such as ceiling fans) that are excluded and chattels (not permanently attached, such as appliances) that are included.”
For example, he says, you might think window blinds would be left behind, but if they aren’t specified in the agreement, the seller wouldn’t be required to leave them. “It’s very important to be aware of those things because again, you’ll be disappointed if you’re not sure,” he says. “A professional who deals with property regularly, such as your estate agent or lawyer, will be able to guide you through the agreement,” he adds.
3. Ask the right questions
The seller is legally obliged to disclose any known “faults” with the property. In other words he or she can’t deliberately hide things. But that doesn’t mean they have to tell you everything.
Dyer says there are two types of defects in homes: those that are “discoverable” – that you or a competent home inspector could find – and those that aren’t.
“For example, rising damp covered by paint would not necessarily be discoverable, so if the wood was rotting behind the paint because of water damage, then the seller would be liable for that damage. Sellers aren’t supposed to hide damage without fixing it,” he says. “But if the seller believes all of the damage was thoroughly fixed, there is no obligation to disclose past issues.”
As a result, home inspections become all the more important. That said, buyers should be aware of the limitations of checks and inspections. For example, home inspectors can’t dig behind walls. Still, it’s always better to get an inspection, says Dyer. “If a defect was discoverable by a home inspector but you skipped an inspection and missed it, the defect would be your problem,” he explains.
“It’s great to find a house that you love and there’s nothing more exciting than getting the keys to your first home,” he admits. “But it really is important to get all the checks done.”
The 72-hour clause: What is it, and why do you need to know about it?
When you sign the offer to purchase, you’ll normally stipulate conditions that need to be fulfilled before you can complete the purchase, such as the sale of your current home, or the granting of a mortgage. This gives you time to acquire the necessary funding.
Of course, for the seller, this part of the agreement can be a cause of frustration, as the process will remain in limbo while they wait for these suspensive conditions to be fulfilled, which can take a while.
This conundrum led to the introduction of the 72-hour clause, which entitles the seller to the following:
- They can continue to market the property, even after accepting an offer to purchase from an interested buyer.
- If they receive a better offer, they can provide the original buyer with written notice, informing them that they’ll have to waive the suspensive conditions and go ahead with the offer to purchase within 72 hours, or the offer to purchase will be rendered null and void, freeing the seller to sign a deal with the new buyer.
It’s important for you to be aware of the 72-hour clause, and to look out for it when investigating the terms of the offer to purchase. Many buyers go ahead and sign an agreement with a seller, believing they’ll have ample time to get their affairs in order, but if the seller invokes the clause, you’re suddenly left with 72 hours in which to acquire the necessary funding or sell your existing property, so that you don’t lose out on the home.
Don’t be hasty…
While buying a property can be exciting, it can be risky to get emotionally connected to it before you have it inspected, and have made sure your finances are in order. Once the offer is firm, says Dyer, it becomes a contract. “People think of it as just an agreement, but it’s actually a binding contract. So make sure that before you sign, you’re really sure and you’re not just getting caught up in the excitement.”
South Africa’s leading home loan comparison service, ooba home loans, can make the home buying process easier by helping you obtain prequalification. They also offer a range of home loan calculators that can help you determine exactly what you can afford. Start with ooba home loans’ free, online prequalification tool, the ooba Bond Indicator. Then, once you’ve found a home that meets your requirements, you can apply for a home loan.