HOW LONG IS AN OTP VALID IN SOUTH AFRICA?
Buying a new house is all so exciting. Once you’ve found the dream home and have submitted the Offer To Purchase (OTP), it becomes a bit of an anxiety-inducing waiting game to see if the seller will accept your offer or if you will need to start the hunt all over again. But, exactly how long is an OTP valid and what can and can’t be stipulated therein?
But first, what is the OTP?
The “OTP” is submitted to the seller of a house and states the amount that the buyer is willing to pay along with a host of other stipulations and clauses related to the sale, including the occupation date, whether or not occupation rent would be required and one other very important thing – the buyer needs to stipulate the deadline date for the seller to accept the offer.
Buyers should keep in mind that this is a legally binding document, so it will need to be drawn up by an attorney or estate agent. It is never a good idea to DIY this one. It can be drawn up by either the buyer’s or the seller’s real estate agent.
The OTP expires when…
The deadline date for the seller to accept the offer is stipulated in the agreement. But, once this date has come and gone, should the seller not sign the agreement in time, the OTP will become null and void.
It does, however, sometimes happen that no date is stipulated on the offer. In this case, the OTP will be valid for what is termed a “reasonable period”. It is best to try and avoid this situation by stipulating a due date otherwise it can become a very drawn-out situation that can make things uncomfortable.
If a buyer has placed the offer pending a few suspensive conditions, the seller will sometimes accept the OTP but will add the ‘72 hour clause’ in the agreement which basically means that the seller can continue marketing the house and if they receive a better offer, the buyer will have 72 hours to complete the purchase of the property. If they fail to finalise the sale, the OTP becomes null and void and the seller is allowed to accept the other offer.
Think before you sign
Keep in mind that this is a legal document and once it is signed it is legally binding. Before submitting the OTP to the seller, read through the document at least three times to make sure you didn’t miss anything and familiarise yourself with all the terms and conditions. It is even advisable to have an attorney look over the document too.
It is also very important that you have your finances in order before signing the offer. Once the seller accepts the OTP, you will be held liable to come up with the necessary funds to go through that offer. Also make sure that you have funds upfront to cover some of the immediate costs, such as the lawyers’ fees for the transfer registration bond registrations and more. Sometimes some of these expenses could be covered by the bond after it is paid out, but not always – speak to your lender or a bond originator to find out what costs will need to be paid upfront.
What if I change my mind?
It is not as simple as that. That is why you need to be absolutely sure before you sign the agreement. However, there are some ways for the OTP to be cancelled or for the OTP to lapse:
- House costs less than R 250 000: In this case, the law allows a five-day cooling off/change-of-mind period during which the buyer can cancel the offer, provided they do so in writing.
- Time ran out: As explained, the OTP contains a “sign by” date. If this date has passed, the contract is cancelled.
- Seller rejects the offer: If this happens, then there is no contract.
- Death: If either the seller or buyer dies before the offer is accepted, the contract is invalid.
Consult the experts
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Disclaimer: The purpose of this article is to provide general information. Readers must please seek professional legal counsel for actionable legal advice on this topic. RE/MAX of Southern Africa cannot be held liable for any action taken by the reader of this article.