Getting the keys to your first home is exciting. But make sure you thoroughly understand the offer to purchase before you sign it.
What Is an Offer to Purchase?
The offer to purchase – or OTP – is a legally binding contract between a buyer and seller that contains all the conditions attached to the purchase of a house. Setting out the sale agreement, the OTP can be accepted, declined or left to lapse by the seller. Alternatively, they can include changes as a counter offer. These will then need to be agreed upon by the buyer.
Who Drafts the Offer to Purchase?
The offer to purchase must be drawn up by someone who is a property expert with a history of having written up such agreements. This is ideally a qualified estate agent or an attorney.
Steps to Take Before Signing an Offer to Purchase
Before you commit to signing an offer to purchase, there are certain steps you should take for a hassle-free home buying experience.
Step 1: Sort Out Your Finances
Make sure you are in a financially stable position before you even contemplate looking at property. You can do this by eliminating or lowering monthly costs, and getting a home loan pre-approval certificate that indicates, to both an estate agent and a seller, that you are a serious buyer. You’ll also need to factor in about 10% of the purchase price for extra costs such as transfer duty, bond registration and associated fees. It’s also best to be prepared to put down a deposit of around 10% to secure a home loan.
Step 2: Find a Property
Once you have your home loan pre-approval certificate, you’ll have a better understanding of what you can actually afford to buy. With this knowledge, you can begin your house hunting, inputting your financial parameters so that you don’t go over budget. Once a property has been found and checked, you can enter into an offer to purchase.
Step 3: Check the Offer Carefully
As with any contract, you need to be sure you understand the document in its entirety before signing anything, otherwise you could be very disappointed. If you don’t understand something, query it with the estate agent, and get a third party with your interests at heart to look over the document as well.
Elements to look out for
Some of the basic elements to check in the offer to purchase include:
The buyer’s and seller’s details are correct;
The property description is accurate and matches the title deed;
The purchase price is as agreed;
The date of occupation and any agreed upon occupational rental amount are correct;
Any special conditions are included and accurate;
A thorough list of defects has been included;
Any and all fixtures are clearly laid out.
What are the fixtures?
When you visit a property, you’re most likely viewing it with all the current owner’s furnishings in it. Some of these will be permanent fittings – fixtures – which are presumably being included as part of the purchase. However, often confusion enters when it comes to fixtures, for example a chandelier which is a family heirloom is removed or replaced by an inferior option. Other fixtures to consider include:
A burglar alarm system
Solar heating system
Air-conditioning units
Wendy house
Shelving
Safe
Pool equipment
Blinds
A mobile kitchen island
What about the 72-hour clause?
When you sign an offer to purchase, there are generally conditions that still need to be fulfilled. And while this gives the buyer more time to perform these conditions, such as concluding the sale of a home, or getting the necessary funding, the delay can be frustrating for a seller looking to conclude a deal. Because of this, the 72-hour clause is sometimes included. This allows the seller to:
Continue marketing the property after accepting your offer to purchase.
Give the potential buyer 72-hours’ written notice that they have received a better offer, and the offer to purchase will be null and void if the sale is not concluded.
Check for all defects
While the seller is legally obliged to outline any property faults in the offer to purchase, there are certain things that might not be made obvious. This is why home inspections are incredibly important and you should know what questions to ask, and what to look out for. Some of the defects that need to be carefully checked for include:
Roof issues
A roof inspection will include checking for broken or missing roof tiles, possible leaks or damage, and general disrepair. Some older roofs may still contain asbestos and this should be disclosed.
Plumbing issues
These can result in very costly repairs if not caught in the inspection. Look out for any potential leaks, checking under the sinks, as well as the outer drainage as well. Water intrusion from poor drainage can be a big problem to deal with.
Rotting wood
Any wooden fixtures in the bathroom or kitchen, as well as those outdoors such as decks, can suffer from moisture and are prone to rotting. The owner must ensure these are protected with a paint or finish. Another big concern, particularly in the KZN region, is wood borer, as infestations can be incredibly expensive to deal with.
Electrical faults
Any home sale will require an electrical compliance certificate which will check that there is no fault related to the system. Even with a certificate, it’s worth doing a second check to ensure there is no wiring issue.
Ventilation concerns
Check that the entire space has sufficient ventilation, including ceiling space below the roofing, ducts and windows. Without proper ventilation, heat cannot escape and moisture can build up resulting in damage to the property.
Professional repairs
A seller might look to cut costs by repairing items around the home themselves, which will leave the buyer with added expenses later on. Check the quality of workmanship around the property to ensure you’re happy with everything.
By working with a property expert like MortgageMarket, you’re empowered with all the relevant property purchase information so that you’re never caught out. Don’t let a home cost you more than it should, make sure you cover all these steps before signing an offer to purchase.
