Buying a property is one of the most important personal finance decisions you’ll ever make, whether you are buying a home or a secondary property as an investment. Following from our previous blog posts on home ownership issues, we now move onto the matter of drafting an Offer to Purchase.
What exactly is an Offer to Purchase?
Once you’ve made the important decision to buy a property at a price that is agreeable to you and the seller, the next step is to draft an Offer to Purchase. This document, which is legally binding, informs the seller of your intention to purchase the property at a certain price. The Offer to Purchase sends a simple message to the seller: “I’m happy with the property and we’ve agreed on a price – I’ll take it.”
What Should Be Included in the Offer to Purchase?
A signed Offer to Purchase is a legally binding Deed of Sale. For this reason, it’s crucial that the document contains all relevant information. Make sure you include the following:
- Date of the Offer
- Details of buyer and seller
- Description of the property, including physical address and erf number
- The Offer price
- Any commissions payable
Once you’ve covered these basic details, you’ll need to add some extra information to your Offer to Purchase to avoid confusion and legal complications:
Dates – Offer and Occupation
The date on which the offer is being made must be stated clearly on the document, as well as the date on which the offer expires. If the seller fails to accept the offer before the date of expiry, the offer becomes null and void.
The occupation date is simply the date on which the buyer wishes to move into the property. This date could be before the date of transfer, as long as both buyer and seller agree to this.
A deposit is a ‘down-payment’ or a portion of the purchase price paid in advance, and is held in trust pending transfer. As such, it is not refunded to the purchaser, but paid to the seller on registration of transfer. Only the interest portion (if any has accrued) is refundable to the purchaser, or alternatively offset against the balance of purchase price due by him or her to the seller on transfer.
If the buyer wishes to move in before the date of transfer, the seller is entitled to charge him or her occupational rent until the transfer goes through.
These are conditions that must be met on the buyer’s side before the sale can take place. These include obtaining a home loan, selling a current property or obtaining an assessment of the new property. Each of these should have a due date associated with it.