At almost every level the demand for housing in South Africa has outstripped supply. In addition to inflating property prices dramatically this has contributed to increased competition between purchasers.
This is particularly true in Cape Town: gone are the days of leisurely Sunday drives through the neighbourhood to visit show houses. Purchasing a house in South Africa has become a high pressure and often cut-throat undertaking.
Now I’m not saying that when you make an offer on a property you need to prepare for a Hunger Games-esque battle to the death with other prospective purchasers. I’m just saying that if that did happen I wouldn’t be surprised.
All jokes aside: Buying a house can quickly become a stressful situation and as a purchaser you might find yourself under some incredible pressure from the owner (or the estate agent). To best prepare yourself you need to get your financials in order, have a good understanding of the market and know how the process of buying a houses works well BEFORE you begin your property search.
With this in mind we will now be discussing the “72 Hour Notice” in this article…
You may believe that once you have made an offer and it has been accepted by the seller you can relax and let the process take its course. Unfortunately this is not always the case. Particularly if you are applying for a home loan or selling a property of your own and this is because sellers very often receive and accept more than one offer on their property.
You may ask: How is that possible? Stick with me now, this is important…
If you check the Offer to Purchase / Agreement of Sale / Deed of Sale document you have signed you may find the following Clause:
72 Hour Ratification
72-Hour Notice Period
Sale of Other Property
Addendum to Offer to Purchase
Which might read as follows:
“Should the Seller at any time prior to the fulfilment of all suspensive conditions receive another unconditional offer (“the competing offer”), he will have the right to call upon the first purchaser, by notice in writing, to waive or fulfil all suspensive conditions within three days (excluding weekends and public holidays) of the date when such notice is delivered to the purchaser. Such notice shall include a copy of the competing offer.”
This means that although the seller has accepted your conditional offer, i.e. subject to approval of a home loan and/or subject to the sale of your existing property (suspensive conditions ), he may accept another unconditional offer i.e. the competing offer.
The seller, or his agent, must then deliver to you a “72-Hours Notice” in writing (e-mail or fax) AND MUST INCLUDE A COPY OF THE UNCONDITIONAL COMPETING OFFER. This means that the agent or seller cannot just send you an e-mail or fax advising that the seller has accepted another offer and giving you 72 hours to waive the conditions on your offer. The e-mail or fax must be accompanied by a copy of the second purchaser’s unconditional offer.
Without a copy of the competing unconditional offer, the first purchaser only has the agent/seller’s word that there is an unconditional offer! (There have been occasions when a seller has received a higher second offer, but such offer is also conditional on bond approval/sale of another property. In such cases the seller has to wait until the second purchaser’s conditions have been fulfilled before he can issue a 72-Hour notice to the first purchaser!)
We are bringing the above to your attention as we recently had the experience where one of our clients received an e-mail from the seller (via the estate agent) as follows:
“Notice by seller to purchaser in respect of Agreement of Sale dated 29 September 2014.
As I have received a bona-fide offer on my property from a third party, which offer I wish to accept, I hereby give you 72 hours to waive the conditions of your offer, failing which the said Agreement of Sale shall lapse and be of no further force and effect.”
In this particular case the “72-Hour Notice” was not accompanied by a copy of the competing offer and the purchaser experienced much resistance from the agent when requesting proof of the “bona fide” other offer. As our client’s home loan application had already been submitted to the banks and he did not have a property to sell, his bond was approved by the time the agent finally provided a copy of the competing offer at 4 p.m. the following day!
If you receive a “72-Hour Notice” after purchasing a property:
- a) Ensure that your offer does, in fact, contain a “72-Hour Notice” Clause;
- b) ALWAYS insist that the 72-Hour Notice be accompanied by a copy of the competing unconditional offer
- c) NEVER waive the suspensive conditions on your Offer to Purchase unless you are absolutely sure your home loan will be granted and, if applicable, you have already sold your existing property with all your buyer’s conditions having been fulfilled.
If you waive the suspensive conditions (i.e. advise the agent/seller that you wish to remove all suspensive conditions from your Offer), you can be sued for misrepresentation if your bond is then not granted or your existing property is not sold!
I hope this has been a helpful piece of information! If you’re going into a purchase (or even just thinking about) and have any questions please feel free to contact me. My staff and I would love to assist you.