Once signed by both the buyer and the seller, an Offer to Purchase (OTP) for a property becomes a legally binding contract. A “cooling off period” applies only to property purchases below R250,000, meaning a buyer can’t simply "pull out of the deal" without potential legal and financial consequences unless specific conditions allow for it.
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This is according to agents from the Seeff Property Group, who says that while a signed offer should generally lead to smooth sailing, that's not always the case. Deals often collapse due to suspensive conditions attached to the offer that aren't fulfilled, or unforeseen issues that arise during the process. Although "buyer's remorse" or "seller's cold feet" sometimes play a role, the failure usually lies in one of the following practical complications.
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The Seeff Property Group highlights six of the most common reasons why property transactions fall through:
1. Inability to secure finance: This is a top reason, as most buyers rely on a home loan. If the application is rejected due to affordability or credit issues, or if the buyer cannot fund a large shortfall between the loan granted and the purchase price, the sale will likely collapse.
2. Sale contingent on existing property: The deal is often conditional on the buyer first selling their current home. If that sale fails to materialise within the stipulated time, the initial offer automatically becomes null and void.
3. Seller fails to complete repairs: Buyers often stipulate that certain actions, such as repairs, must be completed before transfer. If the seller fails to meet these conditions to the buyer’s satisfaction or within the agreed timeframe, the deal may collapse.
4. Certificates of Compliance (CoCs) issues: The seller is legally required to obtain various compliance certificates (electrical, gas, electric fence, plumbing, etc.) before transfer. If the seller fails to obtain these promptly, the buyer may withdraw or renegotiate, potentially causing the sale to fail.
5. Undisclosed defects and disputes: While sellers must disclose known defects, hidden issues can emerge during due diligence or inspections. The discovery of significant, undisclosed defects can prompt the buyer to withdraw their offer or demand a substantial price reduction.
6. Incomplete or incorrect planning approvals: For a legal transfer, all structures must have municipal approval. Discovering illegal structures or incorrect planning approvals can lead to significant delays and costs, potentially requiring demolition, and often causes the buyer to withdraw.
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Echoing Seeff’s analysis, other industry experts point to similar challenges. In a Property24 article, RE/MAX of Southern Africa and legal firm Abrahams & Gross outline three recurring factors that often cause sales to fall through, underscoring the main pressure points in a property transaction:
1. Bond application is rejected: With high interest rates, buyers may no longer qualify for the full bond they expected. If they can’t secure the shortfall, the sale collapses - which is why sellers favour cash buyers or those with pre-approved loans.
2. Suspensive conditions aren't met: A suspensive condition is a requirement that must be met before a sale goes ahead. Common examples include bond approval, removal of unapproved structures, or passing an additional inspection. Both parties must agree, and the sale only proceeds once these conditions are fulfilled.
3. Inspections uncover problems (CoCs): If compliance problems are found - for instance, with the electrical wiring or the plumbing - the seller must fix them at their own expense. Protracted delays in fixing these mandatory issues are a frequent cause of contract expiry and cancellation.
These perspectives collectively demonstrate that the majority of deal failures stem from a breakdown in either buyer financing or the seller's ability to deliver a legally compliant property that meets the agreed-upon contractual conditions.
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