Make sure you are completely protected before putting in an offer to buy a property. Picture: energepic.com/Pexels
An offer-to-purchase (OTP) a property is a legally binding contract that you cannot get out of it without incurring onerous financial penalties, so you need to be ready to buy before you put in an offer.
You cannot put more than one offer in at a time and once that offer is in, it is binding unless it lapses due to your inability to fulfil any potential suspensive conditions, says Samuel Seeff, chairman of the Seeff Property Group.
So, before you make a decision to put in an official offer to buy, these are some things you need to do:
1. Make sure you can actually afford to pay the purchase price
If you need a home loan to help you buy the property, you should do a formal pre-qualification so that you know how much you can buy for and that you will be able to secure a home loan.
2. Ensure you have cash available to put down as a deposit
Generally, he says, banks will only grant a home loan to cover the full purchase price in the case of qualifying first-time buyers. In all other instances, you will need to put down a deposit. Currently, the average deposit requirement is around 10 percent.
3. Make sure you also have cash available for the transaction costs
This can be considerable and include transfer duty, attorneys’ fees, bond registration costs, and other incidentals.
“The money must be available upfront and usually become payable once the conveyancing attorneys start with the transfer process.”
4. Ensure you have all the necessary documents
Seeff says you will need certified copies of your personal documents (ID, proof of address, marriage certificate) and documents required for a home loan application, such as proof of employment and income, and recent three months’ bank statements.
5. Know for sure that the property will meet your future needs
Apart from making sure it suits your needs in terms of long-term family or work plans, find out what the restrictions or regulations are in the case of a home that is part of a community scheme. This is particularly important if you have plans to make alterations or build on to the property. You should also know the rules on things like visitors parking or what you can put in your yard or on your balcony.
Although the seller is not obliged to provide copies of approved building plans to prospective buyers, Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says it is your right as a buyer to ask for them. It can be tricky to obtain the necessary building plans unless provided by the seller so you may want to request to include a clause to that effect in the OTP.
Having approved plans in hand before you buy a property will show you that what you see is what you are getting and is also useful to prevent problems from arising later in the process.
He warns that if the building plans that a homeowner receives from the municipality does not fully resemble the buildings on the property, then the homeowner will need to get new plans drawn up and submitted for approval if these differences are considered major alterations.
As a general principle, any major structural changes will mean that plans must be submitted to the municipality before building can proceed. However, minor building work does not need planning permission. Some examples include:
6. Do a proper walk-through and inspection
See says: “You should be quite sure that you want to buy the property because an offer to purchase is a binding legal contract. You should also familiarise yourself with the neighbourhood, amenities, schools and the daily traffic commute.”
You should also have a professional home inspection done. After the home inspection, you may request repairs or concessions, says Arnold Maritz, co-principal of Lew Geffen Sotheby’s International Realty. Sellers are encouraged to be open with you about negotiating these requests to keep the deal on track. Addressing concerns promptly and reasonably can prevent delays caused by disagreements.
While the Property Practitioners Act does not impose home inspections, Knight Frank South Africa states it does declare that nothing stops you as a prospective buyer from getting a professional property inspection report prior to purchase.
“A professional home inspection is more than just a list of all the flaws in a house. It should identify any problems, make recommendations for corrective action, and estimate the cost of repairs.”
If a home inspection discovers severe flaws, you have a certain amount of time to withdraw your purchase offer. A home inspector should also spot any evident infractions of construction codes or laws.
“Such issues are extremely typical in older homes built prior to the most recent construction rules, such as the asbestos prohibitions. You must be aware of these shortcomings in order to make better-informed selections about your new property.”
The home inspection checklist should include:
Depending on the size of the property, a full inspection report may cost between R4,000 and R10,000.
“Buyers who are well-informed want thorough reports that include all major and minor flaws and provide estimates of the costs of repairing or replacing defective goods,” Knight Frank says.
IOL Business