- Very low interest rates have sparked a good opportunity to get into the property market.
- Buyers should, however, do their homework before making an offer to purchase.
- Such an offer is a legal document and one cannot just back out of it.
Low interest rates have created an attractive environment for property buyers, but first-time buyers must beware the potential pitfalls in an offer to purchase, warns Samuel Seeff, chair of the Seeff Property Group.
Because an offer to purchase is a legal document, it has financial implications, Seeff notes - which is why buyers must ensure they have done their homework, properly inspected a property, and checked they know exactly what they are signing, he says.
Buyers must furthermore ensure they are ready to move forward with the purchase because they cannot just back out once they make an offer. A so-called "cooling-off" period within which a prospective buyer can still cancel an offer, would only apply if the purchase price is below R250 000.
"The key driver of the market is the five-decade-low interest rate which currently provides about a 30% saving on borrowing costs. At the same time, the banks are still keen to lend and first-time buyers can find favourable conditions," says Seeff.
"This has seen a flood of first-time buyers heading to the market who are keen to get an offer to purchase signed and accepted as quickly as possible so that they do not lose out."
Understanding the legalities of making an offer is vital, in the view of Craig Algie and George Clelland, agents with Seeff Southern Suburbs in Cape Town.
"You can only sign one offer at a time unless you are looking to purchase more than one property," said Algie.
"Always ask the agent to explain and clarify anything which is unclear." The full details of the seller and buyer, as well as the date and expiry of the offer should be included. If the seller does not accept the offer by the expiry date, it becomes null and void.
The property description, including address and erf number or section in the case of sectional title, should also be in the offer to purchase.
"Buyers should ensure they are provided with the relevant documents such as conduct rules in the case of a sectional title property or an estate so that they are aware of any restrictions as well as conduct regulations," said Clelland.
Knowing what price to offer might be a sticking point, according to Michelle Vermeulen, principal for Seeff Queensburgh.
"Take guidance from the agent and ask for a list of recent sales in the area. Also check property portals to ensure you are not overpaying for the property," she suggests. The price offered should be clearly stipulated along with the deposit and date on which the deposit must be paid and also how the balance will be paid.
If a mortgage loan is to be secured, that will be stipulated along with the date by when it must be secured. This date can be extended by agreement. There should also be a stipulation that you are entitled to interest earned on the deposit until date of transfer.
"Although exceptionally rare, a cooling-off period can be included by mutual agreement between seller and buyer," said Vermeulen.
Tiaan Pretorius, manager of Seeff Centurion, said it is common for offers to purchase to be made subject to certain suspensive conditions, usually securing a mortgage loan or selling another property. If these are not fulfilled by the stipulated date, which can be extended by agreement, the offer will lapse.
The risk for the seller is that these conditions might not be fulfilled, leaving them without a buyer. A so-called "72-hour clause" could be included in the offer to purchase. This clause allows the seller to continue marketing the property until the relevant suspensive conditions are met. If the first purchaser is unable to do so within 72 hours, the seller is entitled to cancel the agreement and can then accept the offer from the new a purchaser.
Fixtures are deemed part of the property while fittings are not permanently affixed and can be removed by the seller.
Gerhard van der Linde, managing director of Seeff Pretoria East, suggest that buyers check whether any items are excluded such as hanging mirrors, chandeliers, pot plants and so on to avoid later disappointment.
"Stipulate anything which you might like to remain for the seller's consideration," he advised.
Inspect the property thoroughly before signing the offer. The buyer must take care regarding the condition of the property. Request a property condition report which should be attached as an addendum to the agreement of sale and note what disclosures have been made by the seller, according to Van der Linde.
If there is an undertaking by the seller to repair anything, make sure that the agreement clearly spells out what has to be repaired, at whose cost and by when the repairs must be finalised.
It is preferable that these be done before the offer is presented or before transfer to avoid later issues, in his view.
Occupation is usually on registration of transfer, but you can negotiate early occupation and include that with the relevant occupational rent to be paid in the contract. The agent should also provide you with a schedule of estimated transfer and bond registration costs. You will need this cash available upfront so that it can be paid without delay upon request from the relevant attorneys.