Who drafts an OTP?An attorney or estate agent should draft the OTP. It should not be drawn up by someone who is not a property expert, and it's not a good idea to download a 'template' from the internet.
What to look for in an OTPIt's essential that you read the OTP with attention. Don't hesitate to ask if you're unsure about something. If you don't clarify at this stage, you could regret it later. Important aspects to look out for, include:
- Are the buyer's and seller's details correct?
- Is the property description correct, and does it match that of the title deed?
- Is the purchase price accurate?
- Are the occupation date and occupational rent amount in order?
- Are there any special conditions, e.g. securing a bond, or selling another property?
- Are the fixtures and fittings set out clearly in terms of which ones are staying or going?
- Has a list of defects been included?
Before you sign an OTPAs the buyer, the best way to ensure that nothing is missed, is to go over the property with the proverbial fine-tooth comb.
As the seller, a comprehensive list of defects (both latent and patent), should be provided, and included in the OTP.
What if I change my mind after signing an OTP?
Should you decide, for whatever reason, not to go through with your OTP, this could unfortunately be an expensive change of mind. If the seller signs your OTP, the sale agreement is in effect legally binding. If you do not fulfil your share, there could be serious financial implications. For example, you could forfeit your deposit, if you paid one, or be held responsible for the estate agent's commission, if such a fee was part of the deal. That's why you must understand the terms and conditions of the OTP before signing. Saying you didn't know what you were committing to will not stand up to legal scrutiny.
How binding is an Offer to Purchase?
Once signed by the buyer and the seller, the offer becomes a binding contract. The buyer, when making a written offer, is not merely expressing an interest in the property, he is declaring a specific intention to purchase it.
Can I withdraw my offer after signing it?
The offer will have a clause specifying a period of time allowed for acceptance by the seller, usually a few days after you have signed it. Until this period expires you cannot withdraw it – the offer is irrevocable. The seller may accept the offer at any time during the specified period.
What is a ‘subject-to’ offer?
This is when a buyer offers to buy a property ‘subject to’ a suspensive condition (i.e. the sale is Conditional upon something, such as the buyer being able to get a loan, or subject to the buyer being able to sell his existing property).
If it is subject to the sale of the buyer’s property, it means that if his property doesn’t sell by a certain date, the deal is off. The seller can accept the ‘subject to’ offer, and add a clause stating that he will continue to market the property, and should a better offer be obtained from a new purchaser, then the ‘subject to’ purchaser will have 72 hours to remove the ‘subject to’ from the deal.
Escape clause (often called the 72-hour clause):
This is a condition in the sale agreement giving the seller the right to cancel it if he obtains a more favourable offer from another purchaser. It is usually inserted when the 1st buyer is given time to obtain a bond or to sell his own property first (i.e. there are suspensive conditions). You can then add a clause stating that you will continue to market your property, and should a more favourable offer be obtained from a 2nd purchaser (which is usually unconditional or all conditions have already been fulfilled), then the 1st purchaser will have 72 hours (or other agreed period) to remove the ‘subject to’ from his deal and thus commit himself unconditionally, failing which his offer will be cancelled and the 2nd Purchaser’s offer will carry on.
Despite these words of caution, don't let an OTP fill you with fear or dread - just do your homework. This is an exciting part of buying property. You're taking the next big step on your journey to owning a home. Good luck!