When can a house sale fall through?
Category PropertyTime
So, you have received an Offer to Purchase on your property and now you are all set for the sale, right? Not entirely. There are a few reasons why a house sale can fall through and you would need to start again on the search for a buyer for the property. An Offer to Purchase is a binding contract and, once signed, a buyer cannot simply change their mind. However, these contracts usually include "suspensive conditions," which need to be met in order for the sale to continue.
The most common suspensive condition is that the buyer's offer only stands if they can get the needed bond approval. If a buyer is not able to get a bond approval in the time frame that is specified in the contract, then the contract becomes null and void. As many as 60% of applicants are rejected when applying for a bond so this is not a completely uncommon occurrence. Therefore many real estate agents encourage potential buyers to get pre-approval on their bond before they go ahead with searching for a property. If a potential buyer has received pre-approval, then it is far more likely that their bond application will be successful.
Another common suspensive condition is that the potential buyer needs to first sell their own property. This condition can be worrying for the seller because there is a risk that the buyer will not be able to sell their property in a reasonable time frame. Although this condition can be frightening for the buyer, the contract will usually specify a time frame so that if the buyer is not able to sell their property within a given time, then the contract is broken, and the seller can look for a new buyer for their property.
Home inspection conditions might also be included in an Offer to Purchase if the buyer wants to ensure that the home is in good standing before going ahead with the purchase. These conditions usually state that the Offer to Purchase is only valid if the home passes a home inspection first. If the home fails the inspection, or issues are raised during the inspection, then the buyer and seller can come to an agreement to continue with the sale. This usually means that the seller needs to fix the problem, or that the purchase price of the property is reduced to account for the money the buyer would need to spend to fix things.
It's important to know that a potential buyer needs to prove that they have done their best to meet the suspensive conditions before the sale falls through. If the conditions include that the buyer needs to first sell their current property, but they just take it off the market to avoid the sale, then you can take legal action against them for breaking the contract.
The only time a buyer can simply change their mind about making an offer is if the offer is R250 000 or less. In this case, the buyer has 5 days to cancel their Offer to Purchase in writing. This law exists so that low-income buyers are protected from making a purchase that they may later regret.
Finally, another reason a house sale might fall through is because the property plans are incomplete or incorrect. If there are structures on the property that have not been properly approved and are on the plans, then the seller will need to tear down the structures before the sale can go through. This might impact whether the buyer wants the property, if the structure in question was a big part of the reason that they made an offer in the first place, or if tearing down the structure will have some other significant impact on the property in general. If you're selling your home, it's best to get up-to-date plans before you put the property on the market but, if you're in the position where a structure needs to be torn down, you may be able to negotiate with the buyer to keep the sale alive.
In closing, while an Offer to Purchase is a binding contract and a potential buyer cannot simply back out of a sale once one is signed, there are conditions that both the buyer and seller will need to meet for the contract to be valid. As the seller, there are steps that you can take to make sure that this doesn't happen, including asking potential buyers to get pre-approval for their bonds, and ensuring that your home would pass an inspection and that the plans are up to date when you put the property up for sale.
Author: Pierre Rousseau Principal PropertyTime
https://pierrerousseau.co.za/when-can-a-house-sale-fall-through/
Author: Pierre
