You’ve finally found your dream home, got a bond pre-approval so that you know it fits within your budget and now you are ready to take the next step – putting in an offer.
Your opening Offer to Purchase, also known as the OTP, needs to be realistic yet competitive so that it sets you apart from other interested buyers, says Carl Coetzee, CEO of BetterBond. “An OTP is legally binding so only offer what you can actually afford. As it constitutes a Deed of Sale, there could be financial penalties if you pull out.”
Unfortunately, not everyone is a born negotiator, acknowledges Coetzee. “It’s easy to get emotional about buying a home. After all, this is likely to be one of your biggest investments. But try and take the emotion out of your purchase discussions.” Know before you make an offer whether you will be able to compromise on the price. “While you don’t want to overpay for a home, your offer should be enough for a seller to accept, and be competitive with other offers that may come in.”
This is an exciting and crucial part of your home-buying journey. To make it as straightforward as possible, bear the following six guidelines in mind, says Coetzee:
1. Fair purchase price
To decide what to offer, start with looking at whether the home is priced appropriately. You will need to take a look at similar homes in the area and chat with your estate agent. A reasonable seller will accept a fair offer.
2. Why are the owners selling?
Find out why the sellers have put the property on the market. If it is an urgent sale, there may also be room to negotiate.
3. Time on the market
If the property has been listed for a while, the seller may be more eager to accept an offer lower than the price they originally asked for.
4. Thorough inspection
Although the seller is legally obligated to disclose any defects, there may be defects that they are not aware of and it is still worthwhile having the property inspected before you make an offer to purchase. Hidden defects could end up costing you dearly later on.
5. Keep your deposit safe
If you are paying a deposit, make sure it will be refundable if the sale does not go through. The OTP should stipulate that the deposit is in an interest-bearing account until the property transfers into your name. Use an attorney firm’s bank account for the deposit, not a personal bank account. Verify the banking details with the attorney verbally, and not via email, to ensure that any email correspondence is not hacked and that the deposit ends up in the intended account.
6. Check all the details before you sign
Make sure you have read the fine print and understand all the clauses before you sign. Rather clarify first to avoid regrets later. Important details to look out for:
Correct personal details for seller and buyer
The description of the property must match the Title Deed
The purchase price must be the amount you agreed on
Occupation date can be on transfer of property to your name, or earlier. If it is earlier, you will be charged occupational rent and this amount must be included in the OTP. Occupational rent is an amount that you need to pay for using the property before it has been transferred into your name.
Clarify what items or fittings will be staying and what the sellers will take with them when they move.
Include a full list of defects.
Stipulate any suspensive conditions – things that could suspend the rights and obligations set out in the OTP until these conditions are met. If these conditions are not met within a set timeframe, the contract becomes null and void. Common suspensive conditions include the approval of the buyer’s bond and the sale of the buyer’s current home.