-Offer To Purchase…

Buying / Selling a house – the Offer To Purchase (OTP):

You can first watch the following video explaining some of the most important clauses in an Offer to Purchase, and then read in more detail below that.

If you are in the process of buying OR selling a property, it is VERY important to make sure that you understand the Offer To Purchase document, and the meaning AND consequences of the various clauses contained in it. The Offer to Purchase, commonly referred to as the OTP, contains all the terms and conditions of the sale, that are agreed upon between the buyer and the seller. Remember that this document is legally binding, so PLEASE take it seriously. Make sure that you’re not caught off guard by any of the clauses and ensure that you have an understanding of what each clause entails.

When does the process start?
Once you decide to purchase a specific property, you must submit a written and signed Offer To Purchase to the Seller, which contains the terms on which you are willing to purchase his property (usually prepared for you by an estate agent and presented to the seller by the agent).

When does the sale become finalized?
As soon as the seller signs the offer to purchase that you made, acceptance of your offer formally takes place. The document now becomes a valid agreement of sale. Until the seller actually signs the offer, no contract exists.

Can I withdraw my offer after signing it?
The offer will have a clause specifying a period of time allowed for acceptance by the seller, usually a few days after you have signed it. Until this period expires you cannot withdraw it – the offer is irrevocable. The seller may accept the offer at any time during the specified period.

How long does the seller have to respond?
This will depend on the time period you are prepared to allow him to do so, which  should be specified in writing in the Offer to Purchase. Your agent will guide you on this, but you would usually give the seller a few days to accept or revoke the offer. If nothing happens during this period your offer will lapse.

Can the seller accept the offer conditionally?
Yes, he may, but he is effectively making a counter-offer to you and the sale will only be finalised if and when you are prepared to accept his terms. These can be negotiated through your agent. No sale will actually exist until you both agree on all its terms and sign.

Can the estate agent withhold the offer?
No. Once you have signed an offer to purchase which has been drawn up by an estate agent, the agent is compelled to submit it to the seller forthwith.

What if the seller receives two offers simultaneously?
If the seller receives two offers from two different prospective purchasers, the seller has complete freedom either to reject both offers or to accept the one he prefers and reject the other. He does not have to give either of them preferent attention.

Must he sell to me if I offer his asking price?
No. Even if the seller has given a mandated selling price to an agent he is not obliged to accept an offer at this price. You are the one making the offer, not him. If he rejects it he may still be liable to the agent for commission as the agent will have completed his/her mandate, but he is not obliged to sell to you.

Is a verbal acceptance by the seller enforceable?
No. Even if he phones you and says he is accepting your offer but then changes his mind and does not sign, no contract will exist. By law all property sales must be reduced to writing and signed by both parties before a valid agreement of sale takes place.

Can the seller accept the offer after the expiry date?
Not unless you are still willing to buy his property and you are willing to sign an addendum extending the acceptance date that you allowed. Otherwise the offer will lapse automatically once the stipulated period expires and the seller has not formally accepted the offer.

Can the seller reject the offer and then change his mind?
No, definitely not. If he advises you or the estate agent, before the expiry date, that he is not willing to accept your offer, then he is deemed to have formally rejected it. He may not thereafter change his mind and accept it without your consent.

Am I bound to a verbal agreement of sale?
The Alienation of land Act of 1981 provides that a sale of immovable property does not exist until both the seller and the buyer sign a written contract. No one is bound by a mere verbal commitment or agreement to sell where immovable property is concerned.

Can I compile my own Offer to Purchase?
Even if an estate agent is involved, you are perfectly entitled to compile it yourself. You should rather let the agent or an attorney do it for you, however. They have the necessary experience.

How binding is an Offer to Purchase?
Once signed by the buyer and the seller, the offer becomes a binding contract. The buyer, when making a written offer, is not merely expressing an interest in the property, he is declaring a specific intention to purchase it.

What is a ‘subject-to’ offer?
This is when a buyer offers to buy a property ‘subject to’ a suspensive condition (i.e. the sale is Conditional upon something, such as the buyer being able to get a loan, or subject to the buyer being able to sell his existing property).

If it is subject to the sale of the buyer’s property, it means that if his property doesn’t sell by a certain date, the deal is off. The seller can accept the ‘subject to’ offer, and add a clause stating that he will continue to market the property, and should a better offer be obtained from a new purchaser, then the ‘subject to’ purchaser will have 72 hours to remove the ‘subject to’ from the deal.

Escape clause (often called the 72-hour clause):
This is a condition in the sale agreement giving the seller the right to cancel it if he obtains a more favourable offer from another purchaser. It is usually inserted when the 1st buyer is given time to obtain a bond or to sell his own property first (i.e. there are suspensive conditions). You can then add a clause stating that you will continue to market your property, and should a more favourable offer be obtained from a 2nd purchaser (which is usually unconditional or all conditions have already been fulfilled), then the 1st purchaser will have 72 hours (or other agreed period) to remove the ‘subject to’ from his deal and thus commit himself unconditionally, failing which his offer will be cancelled and the 2nd Purchaser’s offer will carry on.

What is the meaning of a ‘counter-offer’?
When a seller receives an Offer to Purchase and he is basically happy with it but wishes to change a few items, it becomes a counter-offer. It goes back to the buyer with the amendments and only when the buyer accepts them does it become a binding contract.

Does either party have any rights to cancel the sale?
As long both parties comply with their obligations, neither has the right to cancel the contract. If either party does not fulfill his obligations, he will be in breach of contract.