02 March 2020

Submitting an offer and having it accepted by the seller is exciting, but it is certainly not the end of your home purchasing journey. There are a few obstacles that you may need to overcome before the home is yours and the keys are handed over…

Obstacle 1: A pending bond approval

When applying for a loan, it is best to get pre-approval from the bank with a written loan commitment letter that you can show the seller. However, being pre-approved is not a guarantee that you will get finance. There are factors that can affect the outcome of your bond application, such as a change in your credit score or the loss of your job.

Obstacle 2: Appraisal is less than expected

The bank providing you with a home loan will send an appraiser to value the property to ensure that it covers their invested interest in the home. The value of the home must at least be equal to the amount you are willing to pay for it. The bank wants to make sure that if you default at any stage, they will be able to recoup their losses. If the bank’s appraisal is lower than the purchase price on the offer to purchase, a price reduction can be negotiated with the seller.

Obstacle 3: A major defect is found during the home inspection

According to South African legislation, all property transactions are still subject to the voetstoots clause (which sometimes appears as “property sold as it now lies” or similar). The clause protects sellers against any claims arising from openly visible defects, as well as hidden defects in the property. However, should the seller have known about the hidden defect and willfully withheld this information, voetstoots does not protect him/her.

The effect of voetstoots is often qualified by a disclosure annexure which often forms part of the OTP. Within the annexure, the seller should declare in detail the condition of various aspects of the property. If your offer has just been accepted, you can bring the defect to the attention of the bank. If the defect is serious enough, the bank will not grant finance, and the deal will fall through. If the issue is not that serious, you should engage the services of an independent attorney who could negotiate or litigate for a price reduction.

What happens if you catch a case of buyer’s remorse?

We’ve all bought something on impulse and immediately regretted it. However, this has some costly legal implications when it comes to buying a home. You can negotiate a cancellation of the offer with the seller and the real estate agent. However, if negotiations prove to be unsuccessful and you do not comply with the stipulations within the contract, you will be at risk of contract breach, and you could be liable to pay damages and the estate agent’s commission if legal action is instituted.
Fun Fact: If the purchase price is below R250 000, the Offer to Purchase should contain a cooling-off period where you can step away from the transaction. However, properties above this R250 000 mark are exempt from the cooling-off period, and the agreement becomes legally binding as soon as it is signed.

Final advice

The journey to becoming a homeowner can be overwhelming at times. It can be incredibly helpful if you’re uncertain about the process to reach out to an experienced real estate professional who can assist with any queries you may have.

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