So you've found a property that you like and submitted an Offer to Purchase but now you aren't so sure anymore. Can you cancel the offer without paying hefty penalties?
According to David Jacobs, Gauteng Regional Manager for the Rawson Property Group, an Offer to Purchase is legally binding from the moment it is signed. However, there are a few situations in which it can be cancelled without paying the hefty penalties that would otherwise apply.
When a suspensive condition is not met
Suspensive conditions are conditions that suspend the contract's obligations (for all parties) until they have been fulfilled.
Common examples include the purchaser getting the necessary bond approval, a successful home inspection, or the sale of the purchaser's current property within a specified amount of time.
Suspensive conditions are added to the Offer to Purchase on request. You have to be able to prove that you were unable to meet a suspensive condition, despite your best efforts.
When there is a breach of contract
Failure to meet a suspensive condition by choice would be considered a breach of contract – as would refusing to go through with the sale without legal cause, or breaking any other terms and conditions in the contract.
If this happens, the party not at fault can justifiably cancel the Offer to Purchase and claim any legitimate damages or losses from the party in breach.
These costs can be significant, from estate agents’ fees and legal costs to compensation for loss of profit or moves that won’t happen.
It’s generally a very contentious process, and could easily end up in litigation, which is why both buyers and sellers are urged to take their contractual responsibilities seriously.
When the offer is on a home priced under R250 000
The only time a buyer can cancel their Offer to Purchase, regardless of suspensive conditions or other clauses, is if the offer is on a home priced under R250k and notification in writing is provided to the seller within five days of signing.
This is a legislated 'cooling off' period designed to protect low-income buyers.
How to protect yourself
Cancelling an Offer to Purchase when all the suspensive conditions have been met is a difficult and often expensive process. So, how can buyers avoid ending up in this kind of situation?
The first step is to be 100% certain of your finances. Crunch the numbers, get pre-qualified, and make completely sure you are comfortable with the commitment you’re making.
Next, you want to remove any room for surprises in terms of the property itself. Do your homework on pricing, check out the neighbourhood, speak to an estate agent and book a home inspection. You need to be sure your offer is realistic and that the property is a good choice for your specific needs.
Once all those boxes are checked, Jacobs says buyers still need to double check that the Offer to Purchase is fair and includes their required suspensive conditions.
These contracts may be fairly standard, but you should never take it for granted that your needs are adequately protected. Talk all the details through with your estate agent, and have your attorney look things over if there is any uncertainty.
Once you sign on that dotted line, you’re committed – you need to be sure you know exactly what you’re getting into and are making the best possible decision with the purchase of your new home.
Questions may be edited for brevity and clarity.
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