Here’s why you should sign one offer to purchase at a time
I have been very lucky not to have had a lot of my offers to purchase accepted by sellers. I think before I bought my first home, I had signed offers on at least five different homes for sale – all in one weekend. I thought that if I widened my net, a few would be accepted by sellers and then I could pick and choose from the accepted offers. What I did not realise was that by doing this, I could easily have landed myself in some serious hot water.
“Once an Offer to Purchase has been signed by both the buyer and seller, it immediately becomes a legal and binding sale agreement,” says Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa. “In fact, the buyer will generally have already signed the contract before it is presented to the seller, which means that buyers need to be certain that they want to purchase the property before they sign the agreement.”
Prospective buyers doing this are quick to hide behind the Consumer Protection Act (CPA), saying that it gives them a “cooling-off period” to change their minds without legal consequences. This is only half the story, though, as the CPA’s “cooling off period” only applies to transactions of less that R250,000.
“Regarding the CPA, a purchaser has the right to cancel the purchase of a property within five business days, and only if the sale is a result of direct marketing (the buyer was approached directly either in person, by mail, or by electronic communication for the purpose of promoting or offering to supply goods or services),” says Goslett, noting that the cooling-off period will not apply to any sales that are a result of any other type of marketing, such as print advertising and show houses. “It will also not apply if the purchase is made by a client that the estate agent is already working with.
“The act offers consumers protection if they enter into a transaction with a supplier in the ordinary course of the supplier’s business. However, this excludes regular property sellers who do not earn a living from selling or buying property.”
The CPA, however, states that if the cooling-off period does apply, the five business days do not start from the date that the offer is signed, but rather the day the property is transferred into the buyer’s name.
This is a huge problem considering that transfer can take between three and six months after the offer is signed! Canceling the agreement at that point would be extremely problematic for all parties involved: The buyer would have incurred a lot of costs and the seller would likely not be able to move on with his plans.
Goslett says buyers should be upfront with sellers and let them know as soon as possible, rather than breaching the contract.
“The seller might be willing to let the buyer off the hook and look for another buyer, rather than drawing out the situation longer than necessary,” says Goslett. “It is possible for the seller to pursue the matter legally, which could leave the buyer with a very expensive impulse purchase on their hands.
“Buyers need to be 100% sure that they want the property before signing any contract.”