THREADS: Cape Town’s Property Tapestry

So, you’ve found your perfect home and can’t wait to submit an Offer to Purchase (OTP).
But as one of the most critical documents when buying property, it makes sense to understand an OTP, which outlines the terms and conditions of the sale agreement between the buyer and the seller. Cape Town real estate expert Sandy Walsh unpacks some key OTP terms and provides practical tips for a successful purchase.

Cape Town property expert Sandy Walsh, General Manager at Property.CoZa Prestige says buyers must be informed before submitting an Offer to Purchase (OTP).

“Even with the help of a reputable estate agent and if you’ve bought property before, understanding key terms in an OTP is essential to maximise your chances of acceptance by the seller,” she comments.

Walsh explains that real estate agents are responsible for defining the terms and conditions of the OTP and advising buyers on how to present their best offer.

Key OTP Terms

Understanding an OTP starts with the basics – the most common terms contained in the document. These include:

Purchase price: The amount the buyer agrees to pay for the property.

Suspensive conditions: Conditions that must be met for the sale to proceed, such as obtaining bond approval or a satisfactory home inspection.

Special conditions: Additional conditions agreed upon by the buyer and seller, such as including certain fixtures or repairs. If there is a repair, be clear on where it will be made, the materials to be used, who will pay for them, and when this work must be completed.

Voetstoots clause: A clause stating that the property is sold “as is” on the day of signing the OTP, and the seller is not liable for any defects unless they were aware of them and failed to disclose them.

Occupation date: The date when the buyer takes possession of the property.

Deposit: The initial payment made by the buyer to secure the purchase.

Suspensive Conditions

Walsh explains that suspensive conditions clauses specify certain conditions that must be met for the sale to proceed and outlines some of the most common suspensive conditions in an OTP:

• Finance clause: This condition stipulates that the offer is subject to the buyer securing financing for the property purchase within a specified period. The offer becomes null and void if the buyer cannot obtain financing within the agreed timeframe.
• Home sale contingency: This condition allows the buyer to make the offer contingent upon selling their existing home. The offer is typically terminated if the buyer fails to sell their current property within the specified timeframe.
• Home inspection clause: This condition gives the buyer the right to conduct a professional home inspection within a specified period. If significant issues are uncovered during the inspection, the buyer may have the option to negotiate repairs or withdraw from the offer.
• Title Deed review: This condition allows the buyer’s attorney to review the property’s title deed and ensure no legal issues or encumbrances could affect ownership rights. If any issues are discovered, the buyer may have the option to negotiate a resolution or withdraw from the offer.
• Occupational rental clause: In cases where the buyer wishes to take early occupation of the property before the transfer, this condition specifies the terms of the occupational rental agreement, including the duration and rental amount.
• Municipal approval clause: This condition requires the seller to provide proof of municipal approval for any alterations or additions made to the property. The offer may be terminated if the seller cannot provide the necessary approvals or approved property plans.
• Subject to zoning approval: If the buyer intends to use the property for a specific purpose, such as rezoning for commercial use, this condition makes the offer contingent upon obtaining the necessary zoning approvals from the local authorities.

“These suspensive conditions protect the interests of both the buyer and seller by ensuring that certain conditions are met before the sale is finalised,” explains Walsh.

She stresses that the parties should negotiate each condition and include them in the OTP to outline the terms under which the sale will proceed.

Wise Up on Special Conditions

Including specific special conditions in the Offer to Purchase (OTP) can provide added protection and clarity throughout the buying process, especially if you are buying your first property.
Walsh suggests some necessary special conditions that buyers should consider including in their OTP:

Finance Clause: This condition allows the buyer a specified period, typically 30 to 60 days, to secure financing for the purchase. Suppose the buyer fails to secure financing within the specified timeframe. In that case, the offer becomes null and void, protecting the buyer from being legally obligated to purchase the property without adequate financing.

Home inspection clause: This condition gives the buyer the right to conduct a professional home inspection within a specified period, typically 7 to 14 days. If significant issues are uncovered during the inspection, the buyer can negotiate repairs or withdraw from the offer without penalty.

Subject to Sale clause: If the buyer needs to sell their current home before purchasing the new property, this clause allows them to make the offer contingent upon selling their existing property within a specified timeframe. The offer becomes null and void if they fail to sell their current home within the specified period.

Title Deed review clause: This condition allows the buyer’s attorney to review the property’s title deed and ensure no outstanding legal issues or encumbrances could affect ownership rights. If problems are uncovered, the buyer can negotiate a resolution with the seller or withdraw from the offer.

Tips for a Successful OTP

Walsh cautions buyers not to get entangled in legal jargon or clauses they do not understand. “Get clarity by asking your real estate agent or attorney to explain these before you sign the OTP,“ she advises.

Walsh offers these helpful OTP tips:

1. Do your property homework: Before making an offer, research the property thoroughly, including its condition, location, and market value.
   Researching the property’s history, neighbourhood and market value can provide valuable insights into its potential investment value and any red flags to consider.
2. Clarify suspensive conditions: Make sure you understand them and their implications, such as obtaining bond approval within a specific timeframe. It is essential to know how they may impact the transaction timeline and your obligations as a buyer.
3. Negotiate special conditions: Discuss any special conditions with the seller to modify the offer to your specific needs, such as requesting repairs or including certain appliances. “Collaborating with the seller to establish mutually beneficial special conditions can help address specific needs or concerns and streamline the purchasing process,” she comments.
4. Be prepared to act quickly: In a competitive market, be ready to make a strong offer and act promptly to secure the property. “Swift decision-making and a well-prepared offer can make the difference between securing your dream home or missing out on the opportunity.
5. Seek professional advice: Consult with a real estate agent or property attorney to review the OTP and provide guidance throughout the process.

Walsh remarks that understanding critical terms in the Offer to Purchase and following these practical tips go a long way in helping buyers navigate the complexities of the property purchase process with confidence and increase their chances of a successful transaction. “Remember, the OTP is a legally binding document, so it’s essential always to approach it carefully and diligently to protect your interests as a buyer.”