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. Buyers must be absolutely sure of their decision since canceling may have serious financial implications for them.
While it is currently a buyers’ market and there are many properties from which buyers can choose, this does not mean a buyer can simply change their mind after signing an offer to purchase an existing property. This is according to Debbie Justus-Ferns, manager of Renprop Residential Sales, who notes that many buyers don’t seem to understand that an offer to purchase is a legally binding document. It is not simply like buying an item of clothing and returning it to the store.
She explains that the offer to purchase is a purchase agreement that contains all the terms and conditions attached to the purchase of the property. In a home sale process, once a buyer has found a home they like and can afford, they submit an offer to purchase to the seller, outlining the price they are willing to pay for the property. In the offer to purchase provision is made for the terms and conditions of the payment of the purchase price agreed upon, the occupation date, and other conditions pertaining to the purchase of the property.
If the seller is happy with the price and other conditions and signs the offer submitted to him by the buyer, a legally binding sale agreement is in full force and effect, subject to fulfillment of the terms and conditions stated in the offer.
When an offer to purchase is signed for an existing property over the value of R250 000 there is no cooling-off period for the purchaser. “This means that buyers cannot simply change their mind and cancel the offer to purchase, and if they do, there may well be serious financial implications,” says Justus-Ferns.
Buyers must be absolutely sure before signing
This is why buyers must be absolutely sure about a property before they place pen to paper and put an offer to purchase in writing. “Ideally buyers should be aware of their ability to financially afford the property before making an offer to purchase, or the cash available to make up for the shortfall if they are using the proceeds from the sale of their current property. Buyers must also have the transfer costs available in cash for the registration of transfer to take place. Furthermore, buyers should make sure they understand all the terms and conditions of the offer to purchase, explained to them by the estate agent during the process of signing the offer. A buyer simply cannot just sign the offer to purchase and say they did not know what they were signing. “Caveat emptor is Latin for let the buyer beware, meaning the buyer assumes the risk in a transaction,” she says.
The parties, property, price, and payment terms and conditions need to be clearly outlined in any offer to purchase agreement. Clauses dealing with breach of the contract are also included.
Justus-Ferns explains that should a buyer simply change their mind about wanting to buy a property, they may lose their deposit if they have put one down, as well as be liable for the estate agent’s commission. The seller may also be entitled to claim damages, and if the offer is already being processed by conveyancing attorneys, they may also claim costs from the buyer. “This could add up to a substantial sum of money, a very expensive change of mind!”
Justus-Ferns concludes by reiterating that buyers need to be absolutely sure they are happy with the state and location of the property, can afford the property, and are happy with the terms and conditions of sale as outlined in the agreement before signing it. “If there is any doubt or uncertainty, buyers should rather ask a legal professional to go over the contract with them before they sign it to explain any terms they may not understand and double-check that all parties’ interests have been accommodated,” she says.