Can I cancel my offer to purchase?
Offer to purchase = OTP
An offer to purchase (OTP) is a document that is signed by a prospective buyer stipulating the sum of money that he is willing to pay to buy the seller’s property, as well as containing the conditions related to the transaction. This document is usually drawn up by the estate agent holding the mandate and the seller accepts the offer by signing it. Once the OTP is signed by all parties, it becomes legally binding on the parties.
If the buyer changes his mind after all parties have signed the OTP, is it possible to cancel?
Well yes, it is almost always possible to cancel, but the question is: what will it cost you? The buyer will usually not be able to cancel the OTP after both parties have signed without any consequences, unless the OTP specifically provides for this. One of the few exceptions would be if the provisions of a suspensive condition are not met. A typical suspensive condition will be that the buyer must secure a bond for a specific amount within a specific timeframe. If the buyer fails to secure a bond (but he must apply and do all reasonably possible to get one), then the OTP will fall away without consequence or penalty.
A suspensive condition literally means that the offer is suspended until that condition is met. This will usually be for a specific and pre-set time, so that it is not dragged out forever. Once the condition(s) is/are met, e.g. bond is granted, the OTP becomes a Deed of Sale and is a valid and legally binding document that will be used to transfer the ownership of the property from the seller to the buyer.
Always thoroughly read through the OTP and ask your agent if there are any clauses that are not clear or that you do not understand!
A few tips to keep in mind when signing an OTP:
- The seller wants to sell his property, so will accept the OTP with the best chance of succeeding (should he be able to choose) on the best possible terms, so we recommend that buyers always have a pre-approved bond.
- Do not sign an OTP if you do not want to buy that property.
- Make sure you understand what you are signing.
- If the stipulations in the offer are not legally binding, the contract could be void, so do not insist on terms that cannot be enforced.
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