First time home buyer - OTP (offer to purchase) - Questions if you have time...

[jezzad]

About to take the plunge and buy my first house. Have found the process a little deurmekaar and not very clear.

1. I have found a house that I like and thats within what I think I can afford (deposit and bond pre approval)
2. Done a walk around
3. Decided to submit a OTP (offer to purchase)

Order of the OTP is as follows

Offer amount
Structure of finance, in this case deposit (more than 50%) in cash and the rest bond.
Offer expiry date
Occupational rent
etc....

Reviewed the OTP this morning and saw the below clause.



Second clause that caught my attention



Questions

1. For the first clause. Does this mean I would be liable to pay any shortfall that the bond doesn’t cover? If so doesn’t seem fair.
2. As I understand the second clause, if the contract is breached (I don't get a full bond per say, and it no longer becomes affordable for me) I could be liable to pay the estate agent their commission and could be held liable to cover any sellers expenses.
3. Are these type of inclusions normal?
4. I have crossed them out and the estate agent is inviting the second one remains in place? Any advice
5. Can I ask to have some text added to the second clause to stipulate that this is only applicable once the bond is approved and I have accepted it?
6. Whats my bond acceptance likelihood, have worked for the same company for 3+ years. Putting down 54% of the cost upfront in cash. Clear credit history?

 

[netcruiser]

I don't know about most, but (2) is usually in the offer to purchase. If you withdraw, you are liable for agent commission and other expenses by the seller.

 

[jezzad]

I don't know about most, but (2) is usually in the offer to purchase. If you withdraw, you are liable for agent commission and other expenses by the seller.

Its pretty ambiguous IMO, the way I read it is a “breach” could be not getting a bond approval.

 

[Steamy Tom]

Either way those clauses are cancelled? But why is there only one initial/signature next to the change?

 

[jezzad]

Either way those clauses are cancelled? But why is there only one initial/signature next to the change?

I crosse them out and initialed next to both (got cut off with my screen shot)

Agent is insisting the second one (longer one) remains in place.

 

[diapason]

As I understand the second clause, if the contract is breached (I don't get a full bond per say, and it no longer becomes affordable for me)

Not being able to get a bond is not a breach of contract. That's why you have that suspensive clause in the OTP. What could be a breach of contract is if you, in some way, prevented or delayed the bond application process, eg you had buyers remorse and tried to miss the relevant dates to prevent the sale from going through.

 

[Venomous]

About to take the plunge and buy my first house. Have found the process a little deurmekaar and not very clear.

1. I have found a house that I like and thats within what I think I can afford (deposit and bond pre approval)
2. Done a walk around
3. Decided to submit a OTP (offer to purchase)

Order of the OTP is as follows

Offer amount
Structure of finance, in this case deposit (more than 50%) in cash and the rest bond.
Offer expiry date
Occupational rent
etc....

Reviewed the OTP this morning and saw the below clause.

View attachment 714143

Second clause that caught my attention

View attachment 714145

Questions

1. For the first clause. Does this mean I would be liable to pay any shortfall that the bond doesn’t cover? If so doesn’t seem fair.
2. As I understand the second clause, if the contract is breached (I don't get a full bond per say, and it no longer becomes affordable for me) I could be liable to pay the estate agent their commission and could be held liable to cover any sellers expenses.
3. Are these type of inclusions normal?
4. I have crossed them out and the estate agent is inviting the second one remains in place? Any advice
5. Can I ask to have some text added to the second clause to stipulate that this is only applicable once the bond is approved and I have accepted it?
6. Whats my bond acceptance likelihood, have worked for the same company for 3+ years. Putting down 54% of the cost upfront in cash. Clear credit history?

Add a clause that if the seller causes delays to the sale process then they will be liable for all and in such an event you have the right to cancel the agreement without any fees/penalties to you as the buyer.

 

[Daisy Cloudskitter]

Can’t recall those 2 clauses but I remember ploughing through those ‘ buyer beware’ T&C definitions - a real pita.

Couple of OTP articles you might find useful :

Can I cancel an offer to purchase?

A signed offer to purchase is a legally binding document, and the terms and conditions in it have to be fulfilled. Cancelling may have serious financial implications.

www.privateproperty.co.za

https://www.snymans.com/advice/buyers-beware-of-the-terms-of-bond-approval/ :

In theory, it seems simple to identify when a suspensive condition relating to bond approval has been fulfilled, but in practice there are a few additional complications that can arise such as a bond being granted but with an unfavourable interest rate, or not for the full amount requested or required by the buyer.

The bond approval process can begin once all the relevant documents have been submitted to the bank. A property valuation will need to be conducted and all the credit and FICA requirements will need to be met in order for the bank to approve the loan.

PS 50% deposit should get you a very decent bond rate. Compare/negotiate between banks (and SA Home Loans) before you bite the bullet.
Good luck.

 

[RonSwanson]

You are entirely within your rights to delete anything in the OTP that you do not feel comfortable with, as well as add anything that is relevant. Yes, these inclusions are "normal", the agent is merely trying to protect their own interests.

Remember that up to now, you as purchaser have no enforceable agreement with the agent. The agent usually has an agreement with the seller in the form of a mandate. They usually try to wheedle another agreement in the OTP with both Seller and Purchaser, and these clauses usually form part of it. You don't have to agree to them. I usually delete these, as well as clauses which state that the Purchaser agrees to pay commission regardless, and the agent has earned their commission on acceptance of the offer.

Breach would be dependent on what is defined as breach in the offer. You are putting down a substantial deposit, which demonstrates good faith from your side, that should be more than enough to indicate to both agent and seller that you are serious. If the agent insists on the clause, then threaten to withdraw the deposit declaration, it's as simple as that. You do not need to stipulate one in the OTP.

It's a buyer's market right now, so you can call the shots.

 

[Sepeng]

Not being able to get a bond is not a breach of contract. That's why you have that suspensive clause in the OTP. What could be a breach of contract is if you, in some way, prevented or delayed the bond application process, eg you had buyers remorse and tried to miss the relevant dates to prevent the sale from going through.

Yeah this - you don't get a bond the whole thing falls through. Same as if your offer is subject to you selling and you don't manage to sell in time.
Also, have a look at the way the bond approval process is worded. For example, a bank approves your loan but at a terrible rate; would you be obliged to accept it? We changed our one OTP to make sure we could decline a loan without it being considered a breach.

 

[The Darkness]

Definitely don't let the agent call ANY shots. You hold the cards. You have the cash. Adapt the contract how you see fit, and let the agent know you'll withdraw should they not comply with your terms.
Estate agents are parasites, and they DO NOT work for the buyer. Their interest is in getting a fat commission, usually for very little actual work.

 

[ToxicBunny]

Definitely don't let the agent call ANY shots. You hold the cards. You have the cash. Adapt the contract how you see fit, and let the agent know you'll withdraw should they not comply with your terms.
Estate agents are parasites, and they DO NOT work for the buyer. Their interest is in getting a fat commission, usually for very little actual work.

Pretty much this.

Tell the agent that those clauses get removed or you walk... and then walk when they push the issue. I can almost guarantee that the agent will come running after you with an amended OTP if you do walk.

 

[jezzad]

After a lot of back and forth I added in an extra clause. Which they finally agreed to

OTP Subject to bond approval and my approval of the bond conditions.

Jesus it was like I was asking them to bend over backwards and do all this work for free.

 

[KleinBoontjie]

Had the same when I bought my house. Told them I want to change some things on the OTP and they first didn't want to. But quickly phoned back and comply.
Also, they were like wolfs. Even some other agents phoned me trying to get me to buy through them. And even after I bought the house, they were phoning to ask if I want to sell the house now.

 

[Steamy Tom]

After a lot of back and forth I added in an extra clause. Which they finally agreed to

OTP Subject to bond approval and my approval of the bond conditions.

Jesus it was like I was asking them to bend over backwards and do all this work for free.

... subject to a satisfactory bond approval you should word it...

 

[The Darkness]

Also, OP, be very sure to require to see the official, certified houseplans for the property. This is to verify that there are no illegal additions to the property (which would sting for you). Be sure to have your own electrician come and do a quick verification on the house wiring, and a plumber to check everything. DO NOT trust that the agent/seller has done this in a legit way. I have been burned in the past with a dodgy certificate and when it comes time to challenge things, the agent/seller's lawyers all play dodge. DONT trust these bottom feeders. Also, before you sign, take detailed photos of the entire property. Every, plug, door, etc.