The 72-Hour Clause
Category Legal
There's nothing more exciting than getting the keys to your first home! And for many first time home buyers or inexperienced buyers, signing an "OTP" (Offer to Purchase) is a daunting task. As your real estate agent, our role is to ensure that your buying process goes smoothly. And in order for any legal process to go smoothly, there are a few important things to take cognisance of. So, over the next few days we'll explore important things to look out for when signing an offer to purchase.
Conditions...
Most of us are aware that when you sign an offer to purchase, you're able to stipulate conditions that need to be fulfilled before you can complete the purchase, such as the sale of your current home, or the granting of a mortgage bond. This gives you time to acquire the necessary funding in order to buy the home.
Of course, for the Seller, this part of the agreement can be a cause of frustration, as the process will remain in limbo while they wait for these suspensive conditions to be fulfilled, which can take a while. Bond approvals can take up to a month or more and selling a home, especially in the current economy, can take up to 3 months or more.
In order to realistically manage this timeframe "limbo", the 72-hour clause is introduced to protect the Seller from having to lose out on other potential offers in this timeframe.
What is a "72-hour clause" and why use it?
The 72-hour clause entitles the Seller to the following:
- They can continue to market the property, even after accepting an offer to purchase from an interested buyer.
- If they receive a better offer, they can provide the original buyer with written notice, informing them that they have 72 hours from the notice to:
- Fulfil the conditions (which often includes final bond approval or an unconditional sale of their existing property) so that the deal is sealed; or
- Waive the suspensive conditions, which means the Buyer takes the risk to purchase the new home, without it being subject to finance.
Should the Buyer not be able to fulfil or waive the conditions within the 72 hours, then that offer will lapse and the Seller may continue signing a deal with the new buyer.
It's important for you to be aware of the 72-hour clause, and to look out for it when investigating the terms of the offer to purchase. Many buyers go ahead and sign an agreement with a seller, believing they'll have ample time to get their affairs in order, but if the seller invokes the clause, you're suddenly left with 72 hours in which to acquire the necessary funding or sell your existing property, so that you don't lose out on your new home.
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Read more: Occupation Date & Rent
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Content credit: Ooba
Author: Louw & Coetzee Properties
