Signing an offer to purchase (OTP) a home does not mean your offer will be accepted or that the sale will go through, but it is a legal document that needs to be very carefully understood.
A Durban family was recently ordered to pay a real estate company R40,000 in commission as well as their legal fees after the deal to buy a property they had put in a written offer for, fell through.
For first time buyers, though, signing an OTP can be exciting, but you should not rush into it as, no matter the outcome of the sale, the document is legally binding.
Carlo Mariani, founder of The Property Coach, Mariani says you should beware of any claims by sellers and agents that you should sign the offer without any worries because it is a “standard agreement”. This is because there is no such thing as a standard agreement.
“I often come across a number of really nasty clauses in agreements that are designed to reduce your rights and boost those of sellers and agents. Ask for a copy of the agreement, take it home, read it with care, and ask for advice if you do not understand something.”
Because an OTP is a legally binding agreement, it can cause problems, such as having to pay agent’s commission even if you never take transfer of the property.
Once you have taken due care and signed the agreement, a lengthy admin process begins, and if you are doing it for the first time, it can be tricky knowing what to expect next, says Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa. It can also seem quite overwhelming.
“There is a lot of paperwork to get through before you can start thinking about the actual move to a new home.”
After signing the OTP, the first hurdle you will face is waiting to hear if the seller will either accept or counter your offer.
“When signing the OTP, the agent will usually state a time-frame for how long the seller has to respond to the offer. If this time lapses before the seller responds, you can either decide to extend the offer by a few days or you could choose to cancel the offer entirely.”
He adds that there are three possible outcomes after submitting an OTP:
1. The seller will either accept the offer as it stands
2. The seller could simply reject the offer completely.
3. The seller might counter the offer with a higher price or some other suspensive condition. If the seller counters your initial offer, you can decide whether to accept the higher price or enter into price negotiations. Alternatively, you can simply deny the counter-offer and move on with your property search.
If the offer is accepted, Goslett says the next step would be to fulfil any suspensive conditions. For first time buyers, this usually means getting their finances together.
“Those who are purchasing through the help of a home loan will be given a time-frame – usually about two weeks or so, to secure the required financing. If you’re working through a bond originator...your bond consultant will guide you through this process and will help to ensure that your bond is finalised within the stipulated time-frame.”
If a deposit amount was agreed to, then you will also need to ensure that the transferring attorney (chosen by the seller) receives that money within the time-frame that was agreed to within the OTP.
Shortly after the OTP is signed, the transferring attorney will also get in touch with you to ask for the various documents that are required in order for the property to be transferred into your name. At this point, he says the transferring attorney becomes the point of contact for any queries you might have regarding the transfer process going forward, and will typically share a timeline that will outline the various steps that need to be completed before transfer can take place. This includes everything from paying the transfer costs right up to signing the registration papers right at the end.
“The first few weeks after signing your very first offer to purchase might feel a bit overwhelming, but this is also where your real estate agent can prove very helpful. If you are ever uncertain about what is expected from you next, reach out to your agent and ask for guidance. As experts in the industry, a good real estate agent can provide some free advice and will be there to help you every step of the way,” Goslett says.
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