Beyond the offer, why property deals fall through

Once signed by both the buyer and the seller, an Offer to Purchase (OTP) a property becomes a legally binding contract. A “cooling off period” applies only to property purchases below R250,000, and a buyer can therefore not simply “pull out of the deal” without potential legal and financial consequences, unless specific conditions allow for it, according to agents from the Seeff Property Group.

Once the offer is accepted, it should generally be fairly smooth sailing from here, but that is not always the case. More often than not, there are conditions (suspensive conditions) attached to the offer which need to be fulfilled. While there may sometimes be issues with “buyer’s remorse” or “seller’s cold feet,” which could cause the deal to collapse, it is often due to these suspensive conditions, or unforeseen issues which may arise during the process.

Seeff highlights six of the most common reasons why property transactions fall through:

#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.

Issued by Gina Meintjes