In the intricate landscape of property transactions, understanding the stumbling blocks that can derail deals is crucial. Financial constraints, suspensive conditions, and inspection compliance are the triad of issues that often lead to transaction failures.
Financial hurdles stand as one of the primary reasons for a property transaction to crumple prior to transfer. With interest rates as high as they are, and many prospective buyers feeling the pinch of rising living costs and poor income growth, banks are not as quick to qualify buyers for the full bond amount as they would have been during the pandemic. If the buyer fails to secure the necessary funding elsewhere, which is very rarely even a possibility, the sale will inevitably fall through.
To avoid disappointment and lengthy delays in the sales process, serious buyers should have a realistic understanding of their current financial circumstances and secure pre-approval through a trusted financial advisor.
A suspensive condition is a particular requirement outlined in the Offer to Purchase that needs to be fulfilled within a specified timeframe for the sales transaction to proceed. These conditions are typically included in a sales agreement to safeguard the interests of both the buyer and the seller. If these conditions are not met within the specified timeframe, the entire agreement becomes null and void. Neither party can claim contractual damages for the other party’s failure to meet a suspensive condition. The two most common suspensive conditions are the buyer's bond approval and the sale of the buyer's existing home, although other conditions may be included by either buyer or seller. Only when all specified conditions are fulfilled, is the agreement deemed to be in full force and effect.
In the E&Y Offer to Purchase, one such suspensive condition is listed as: “The sale is subject to the suspensive condition that the Purchaser […]”
Before the property can be transferred into the new homeowner’s name, its crucial that the seller secure the requisite certificates of compliance (CoCs) that underscore the property’s safety and structural integrity. Mandated by South African law, these compliance certificates include electrical, gas, and electric fence installations. In some provinces and municipalities, additional CoCs form part of the standard sales agreement, even if they are no longer legally obligatory.
Furthermore, banks require these compliance certificates prior to issuing a home loan. This ensures the bonded property adheres to safety regulations. If the seller fails to produce these certificates he risks deterring buyers reliant on securing home loan finance. Should the inspection uncover non-compliance issues, the seller must rectify the issues at his own expense before the Offer to Purchase expires; failure to do so could jeopardise the sale.
To mitigate the risk of a sale falling through due to inspection and compliance issues, both sellers and buyers must ensure the requisite CoCs are in order. With these in hand, buyers can furnish their household insurance providers with evidence that the purchased property aligns with legal safety standards. This provides buyers with the reassurance that their new purchase is not only safe and habitable but also grants them the peace of mind they deserve.
With these insights, both buyers and sellers can navigate the complexities of property sales with confidence, facilitating smoother and more successful transactions.