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Understanding the ins and outs of a property sales agreement

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In the world of property transactions, one crucial document serves as the cornerstone of the entire process—the property sales agreement. While it may seem intimidating at first, understanding its significance is essential for both buyers and sellers.

1. What is a Property Sales Agreement?

A property sales agreement is a legally binding contract signed by both the buyer and seller. This written agreement is typically divided into two sections—the Offer to Purchase and the Acceptance of Purchase. Together, they create a valid contractual arrangement that sets the stage for the property transaction.

Verbal agreements hold no weight in property sales – without a written and signed document containing all the necessary details, the property transfer cannot be registered with the Deeds Office.

2. Key Elements of a Property Sales Agreement

While every property sales agreement is unique, certain vital details must be present to ensure its validity. These include:

  • Names, ID numbers, and addresses of both buyer and seller
  • Agreed purchase price
  • Registered details of the property

Additional optional details often covered in the agreement may encompass fixtures and fittings, details of conveyancers and estate agents, division of responsibility for costs, date of occupation, required certificates, a voetstoots clause (as-is clause), suspensive conditions, and breach procedures.

Pay careful attention to the following terms, specifications, and clauses in the document before putting pen to paper.

Conditions of sale

Both the buyer and the seller stipulate conditions in the offer to purchase. Typically this section states that the purchase is subject to finance and bond approval on the part of the buyer, subject to the sale of another property, or even to the outcome of specialist inspection approvals.

The clause that states that the sale is dependent on bond approval should allow a realistic timeframe for this to be achieved. Where this is the case the potential buyer should notify the property agent as soon as the home loan is granted for the offer to purchase to become valid and to set the process in motion. Be cautious and ensure that the timeframe given for any deposit or cash payment is realistic and that you have sufficient time to notify your bank to release the funds. Money that is on 32-day notice (or similar) can only be transferred after the notice period is up.

Fixtures and fittings

The rule of thumb is that items that are fixed to the surface of the property, such as burglar bars and safety gates, are included in the purchase price. Movable items, like curtains, mirrors, and garden pots, are generally not, unless specified, and would thus be removed by the seller.

It is not uncommon for the buyer and seller to agree about fixtures and fittings that have been custom-made for the property to stay, or pieces that add to the specific aesthetic of the property.

Whatever is decided, make sure you have it in writing to avoid confusion or unhappiness further down the line.

Occupation date

The buyer and the seller need to agree on the date when the house will be vacated by the seller so that the buyer can move in. Most buyers and sellers usually need to make various moving arrangements so it is helpful to determine and clarify this date well in advance.

Occupational rent

Occupational rent is paid if the buyer needs to move into the property before it has been transferred and registered in their name. Conversely, it also applies when a seller remains in occupation of the property after it has been registered and transferred to the new owner.

Very simply, it is compensation for the use of a property that you’re not the owner of, and will only be occupying for a short-term period.

Purchase price

The purchase price is the most important stipulation in the offer to purchase document. The price offered by the buyer should be stipulated, together with a timeframe within which the seller needs to accept, reject or negotiate it.

Also make sure you’re acquainted with the clauses that stipulate the commissions to agents, the expiry date of the offer, and the need for various compliance certificates.

Lastly, take care to ensure that any verbal discussions and decisions to change anything in the contract are put in writing and signed by all parties.

Familiarising yourself with the offer to purchase not only allows for the buying and selling process to run more smoothly but also protects the parties involved against hassles that may arise later on.

3. Seeking Professional Assistance

Given the complexity of property sales agreements and the potential pitfalls that may arise, it’s strongly recommended to seek professional assistance. While some may consider drafting the agreement independently, this approach can lead to unintentional gaps or loopholes with severe repercussions later on.

To ensure a smooth and secure transaction, relying on the expertise of a real estate agent is the safest bet. In many cases, the seller’s real estate agent will aid buyers in drafting the Offer to Purchase.

4. The Legal Binding Point

Buyers are often under the impression that once they sign an Offer to Purchase, they are immediately bound by the agreement. However, this isn’t always the case. The Offer to Purchase may include a clause stating that it is irrevocable for a specific period.

Without such a clause, buyers retain the option to withdraw their offer until the seller accepts it. Once both parties sign the Acceptance of Purchase, the agreement becomes legally binding. Only a breach of contract or failure to meet suspensive conditions (e.g., securing finance) would nullify the agreement and halt the sale.

5. Negotiating with the Seller

In the event the seller rejects the buyer’s offer, the existing agreement becomes invalid and cannot be reconsidered later. To negotiate, both parties need to draw up a new Offer to Purchase, reflecting any amendments to the purchase price.

Verbal negotiations can be useful, but it’s crucial to understand that until written and signed by both parties, a verbal agreement is not legally binding.

Original Article: https://www.myproperty.co.za/news/legal/understanding-the-ins-and-outs-of-a-property-sales-agreement-19-02-24

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