One of the most essential components of any property transaction is the contract between buyer and seller known as the property sales agreement. This contract sets the stage for everything that follows during the property transaction. Taking it for granted can lead to problems down the line.
READ: Property buyers and sellers, don’t just sign any document
“Like most contracts, property sales agreements can be intimidating when you don’t know what’s normal,” says David Jacobs, Gauteng Regional Sales Manager for the Rawson Property Group. “Becoming familiar with the basics can help buyers and sellers feel much more confident during the offer and acceptance process and ensure their interests are protected at all times.”
These are the most important things to know:
What do property sales agreements look like?
A property sales agreement is a written agreement that is signed by both the buyer and the seller. It can be split into two parts – the Offer to Purchase and the Acceptance of Purchase – but these parts must clearly reference each other to form a valid contractual agreement.
“It’s important to note that word-of-mouth agreements are not valid for property sales,” says Jacobs. “Without a written and signed document, including all the necessary details, the Deeds Office cannot register the transfer of a property.”
What information must be included?
While no two sales agreements are ever quite the same, there are some key details that must always be present.
“The names, ID numbers, and addresses of the buyer and seller, the agreed purchase price, and the registered details of the property must all be included for the contract to be valid,” says Jacobs.
Everything else is optional, but normally covers fixtures and fittings, conveyancer and estate agent details, division of responsibility for costs, date of occupation, required certificates, a voetstoots clause, suspensive conditions and the process to be followed in the event of breach.
READ: Buyers and sellers: Real estate terms demystified
Who draws up the agreements?
“These agreements detail every element of the property transaction, including all the responsibilities of the buyer and the seller, and any suspensive conditions,” he says. “If you plan to do this on your own, you really don’t want to risk leaving gaps or loopholes that could backfire on you down the line,” Jacobs says getting professional assistance from a real estate agent is always the safest bet. In most cases, the seller’s real estate agent will help buyers draw up an Offer to Purchase.
When do property sale agreements become legally binding?
Buyers are often told that the moment they sign an Offer to Purchase, they are legally bound to follow through. According to Jacobs, however, this isn’t always the case.
“An Offer to Purchase may include a clause stating that it is irrevocable for a specific period of time,” he says. “Without this clause, however, the buyer can withdraw their offer at any point before the seller accepts it.
“Once the seller signs the Acceptance of Purchase, both parties are considered legally bound,” he continues. “At this point, only breach of contract or failure to meet any suspensive conditions – like securing finance, for example – would nullify the agreement and/or prevent the sale from moving forward.”
What happens if the seller wants to negotiate?
Should the seller reject the buyer’s offer for any reason, Jacobs says the agreement on the table becomes immediately invalid and cannot be accepted later on. If the parties wish to negotiate, a new Offer to Purchase will need to be drawn up reflecting the amended purchase price.
“It’s often helpful to negotiate verbally, usually via the seller’s estate agent, to reach a consensus on price before drawing up a final Offer to Purchase,” says Jacobs. “This can save a lot of back-and-forth and unnecessary paperwork as long as everyone understands that – until it is written and signed by both parties – a verbal agreement isn’t binding on anyone.”
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