Point of view: Understanding the Offer to Purchase in South Africa's property market

In South Africa’s property market, signing an Offer to Purchase (OTP) is often seen as a milestone, a moment of triumph after weeks or months of house hunting. But beneath the excitement lies a sobering truth: once signed by both buyer and seller, the OTP becomes a legally binding contract. Unless the property is priced below R250,000, where a cooling-off period applies, there’s no easy way to back out without risking legal or financial consequences.

Many prospective buyers underestimate the weight of this commitment. Whether you're a seasoned homeowner or navigating the process for the first time, it’s crucial to understand that the deal isn’t sealed until all suspensive conditions are met. According to agents from the Seeff Property Group, most failed transactions aren’t due to cold feet, they’re the result of practical, often overlooked hurdles.

Even after the seller accepts your offer, the transaction is far from guaranteed. Suspensive conditions, those clauses that must be fulfilled before the sale can proceed, are often the reason deals fall through. And while we often hear stories of buyers backing out or sellers changing their minds, the truth is that most failed transactions stem from practical hurdles.

Seeff outlines six common reasons why property deals collapse, and each one is a lesson in what to look out for:

#1 - If the buyer cannot secure a home loan, or the shortfall is too big to fund. This is one of the top reasons since most buyers rely on finance. If the buyer's loan application is rejected due to affordability or credit issues, or the buyer cannot fund the shortfall, the sale will likely collapse. This is a standard suspensive condition in most OTPs.

#2 - If the sale is contingent upon the buyer selling an existing property before the transaction can proceed. This is often the case where the buyer must first sell their property, or need to sell for a particular price. If the buyer’s existing home sale fails to sell within the stipulated time, the offer becomes null and void.

#3 - If the seller fails to complete agreed-upon actions, such as repairs, the deal could fall through. Buyers often stipulate certain conditions which must be met before transfer of the property. If these are not completed to their satisfaction or within the agreed time, the deal will likely collapse.

#4 - If the required Certificates of Compliance (electrical, gas, electric fence, plumbing, etc.) are not forthcoming. The seller is legally required to obtain these before transfer. If the seller fails to obtain these within the agreed time, the buyer may withdraw or renegotiate, and if no agreement is reached, the sale could fail.

#5 - If there are property defects and disclosure disputes. While sellers are obligated to disclose known defects, hidden issues can emerge during due diligence or inspections. If significant, undisclosed defects are discovered, buyers may withdraw their offer or demand a substantial price reduction, which could collapse the transaction.

#6 - If there are incomplete or incorrect planning approvals or illegal structures. For a legal property transfer, all structures need municipal approval. Discovery of any of this could cause significant delays and costs, potentially requiring demolition. These issues often cause the buyer to withdraw from the deal.

As someone still navigating the property market, I’ve learned that buying a home is as much about legal literacy as it is about emotional readiness. The OTP is not a casual gesture, it’s a contract with teeth. And while suspensive conditions offer some protection, they’re not a guarantee.

Before signing anything, ask questions. Get legal advice. Understand your financial position. And most importantly, don’t let excitement cloud your judgment. Because once you commit, walking away isn’t just difficult, it could be costly.

* Maleke is the editor of Personal Finance.

PERSONAL FINANCE