A written proposal is the foundation of a real estate transaction. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your receiving a Offer to Purchase. This proposal not only specifies price, but also all the terms and conditions of the purchase. For example, if you the seller offered to help with R2,000 toward the conveyancing costs, make sure that's included in your written offer and in the final completed contract, or you could have disputes later. See the Legal Section for detailed information.
Reputable agents have standard purchase agreements and will help you put together a written, legally binding offer that reflects the price as well as terms and conditions that are right for you. Reputable companies such as Property Network have drawn upon years of professional and legal experience in proving you the seller with a solid contract – with no small print.
Make sure your agent guides you through the offer, counteroffer, negotiating and closing processes.
After the offer is drawn up and signed, it is presented to you the seller by your real estate agent, or if the buyer has their own agent, then sometimes by the two together. In a few areas, sales contracts are drawn up by the parties' lawyers but this is not necessary at all unless the transaction is complex one with many unusual provisos.
In any event, your agent will consult with legal counsel prior to adding any unusual clauses to your agreement.
BASICS OF AN OFFER Top
The purchase offer you submit, if accepted as it stands, will become a binding sales contract. So it's important that the purchase offer contains all the items that will serve as a "blueprint for the final sale." Please read the Legal Section if you want more detailed information
The purchase offer includes items such as:
- address and the legal description of the property
- sale price
- terms: for example, all cash or subject to you obtaining a bond for a given amount
- seller's promise to provide clear title (ownership)
- target date for closing (the actual sale)
- amount of the deposit accompanying the offer, whether it's a cheque, cash or promissory note, and how it's to be returned to you if the offer is rejected - or kept as damages if the buyer later backs out for no good reason
- method by which real estate taxes, rents, fuel, water bills and utilities payments are to be adjusted (prorated) between buyer and seller
- provisions about who will pay for any surveying, borer beetle inspections, electrical certificates etc.
- disclosure of specific environmental hazards or other known defects
- a provision that the buyer may make a last-minute walkthrough inspection of the property just before the closing
- a time limit (preferably short) after which the offer will expire
- contingencies, which are an extremely important matter and that are discussed in detail below
CONTINGENCIES – “SUBJECT TO” CLAUSES Top
If your offer says "this offer is contingent upon (or subject to) a certain event," you're saying that you will only go through with the purchase if that event occurs. Here are three common contingencies contained in a purchase offer:
- The buyer obtaining specific financing from a lending institution: If the loan can't be found, the buyer won't be bound by the contract.
- A satisfactory report by a home inspector: for example, "within 10 days after acceptance of the offer." The seller must wait 10 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract.
- The buyer successfully selling their own home first and by a certain date.
CONSIDERING OFFERS Top
When reading an offer, keep in mind that you are out to get the best price AND the best terms for you. If you focus solely on the price, you may overlook terms that could be favourable to you as a seller.
Some terms that may work in your favour:
- the buyer will pay for most or all of the transfer costs
- the buyer will take care of any repairs
- quick close - the buyer is pre-approved and ready to close in a time that best suits you
- all-cash deal
- the buyer is willing to be flexible on an occupation date
Allow the agent room to negotiate to get a win win deal. Terms are another factor which may be adjusted to attract buyers. If you insist on getting your asking price, think of what you can offer to the buyers, for example, improvements you've made, or allowing them additional time to sell their property. Assist the agent in convincing them why they should be paying the price you have set.
COUNTEROFFERS Top
When you receive a purchase offer from a would-be buyer, remember that unless you accept it exactly as it stands, unconditionally, the buyer is free to walk away. Any change you make in a counteroffer puts you at risk of losing that chance to sell.
Basically, you have three options when receiving an offer
- Accept the offer exactly as presented - and your home is sold!
- Make a counter proposal. In other words, propose changes to the offer, i.e. price, personal property, transfer or possession dates etc. so that it is acceptable to you.
- Reject the offer – this is hardly ever advisable as you close the door to further negotiation
BARGAINING Top
You have done everything that your agent recommended to make your home look wonderful and you have cut your asking price to the bone. Even so, an offer comes in which is so low that you are offended! Is it possible to reconcile your differences and reach a meeting of the minds when presented with such an offer?
Please remember, that by law, the agent MUST present every offer received, so a low offer is not a reflection of the agent’s opinion or advice.
It may not take many concessions on your part to make the transaction work if the people who love your house also love to bargain. Even though it may seem that you are far apart in Rand amount or terms of sale, the real distance may not be all that great.
Your real estate agent can help you determine if the buyers are ready, willing and able to carry through with the transaction. If they are qualified, the next step involves evaluating your differences. Look for areas where you have some flexibility to negotiate. You may have to go back and forth several times in order to make the transaction work. The trick is to be patient and to not take the process personally!
Remember to let your agent use their negotiation skills.
As each offer is received, your agent will arrange to present the offer to you for discussion. If the buyer has been brought by another agent, who has taken the offer, your agent may not yet even be aware of the conditions in the offer.
PLAYING WITH COSTS Top
Who pays for what items is often determined by local custom. You can, however, negotiate with the buyer any agreement you want about who pays for the following costs:
- termite inspection
- surveys
- conveyancing fees and other closing costs
- agents commission fees
- repairs required by the lender or buyer
- home inspections
- appraiser valuations
FINDING THE RIGHT BUYER Top
The best buyer is one who is highly motivated. A highly motivated buyer is more likely to offer full price or close to it, with minimal other conditions. And it matters that you find out why; learning the reason why can help you get the price you want and help the buyer get what they want: a house they have set their heart on.
This is where your agent will be at work, delving and getting information, finding our as much as possible about the buyers and why they are buying. The reasons could be anything from job change to a new location to financial problems. Maybe the local school is important to them. If you can solve the buyer’s problem, whether it is cash related, location or time related, do so. For example, if the buyers are highly motivated because they need to move quickly, give them an early occupation date - and full price.
There are also some buyers however that you should try and avoid. Not every buyer is as genuinely motivated as they make themselves to be and are maybe just testing the market and are not even genuinely interested in buying. Perhaps your home is not first choice and they are playing as if interested in case another option comes up. Your agent will recognise the delaying tactics and let you know very quickly.
WITHDRAWING AN OFFER
Can a buyer take back an offer? In most cases the answer is no as the offer will state that is irrevocable until the acceptance date provided to the seller. If not irrevocable then yes, right up until the moment it is accepted, or even in some cases, if the buyer has not yet been notified of acceptance. Property Network contracts automatically state that the offer is irrevocable by the buyer and once acceptd by the seller is a full and binding contract - no withdrawing.
Whether as a buyer or a seller, if you do want to revoke your offer, or acceptance of offer, be sure to do so in writing, to all parties. Speak to your agent who will be able to provide proper advice or if need be refer you to a lawyer who is experienced in real estate matters before doing this. You don't want to find yourself being sued for damages the buyer may have suffered by relying on your actions.
In South Africa, under the Alienation of Land Act of 1981, buyers of properties under R250,000 have five working days as a cooling off period in which they can withdraw from the sale.
CLOSING THE DEAL Top
Once all negotiations are over, and both parties have signed – your home is sold. Do not quite begin the celebrations yet and be careful that you do not begin to incur costs anticipating the sale.
If your buyer’s deal is subject to the approval of a bond, wait for this approval. If subject to the sale of their property then wait until that deal is secured. Your agent will keep you updated as to the progress of all suspensive clauses until the day they can finally say – Congratulations!
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