5 common reasons why property sales fall through after signing an OTP
Category Advice
The current state of the property market has posed many challenges for sellers. However, despite the market conditions, one of the most disappointing experiences in real estate is having a property sale fall through after signing an Offer to Purchase (OTP).
Understanding the common pitfalls that lead to these failures can help you avoid them and ensure a smooth transaction. In this article, we examine five of the most common reasons why property sales fall through after signing an OTP while offering tips for buyers and sellers on how to prepare effectively.
Unmet suspensive conditions
Suspensive conditions are clauses in the OTP that must be fulfilled before the sale can proceed. These conditions often include obtaining financing, selling a current property, or performing necessary repairs. The sale can fall through if any of these conditions are not met within the stipulated timeframe.
A buyer might include a suspensive condition that they must secure a home loan within 30 days. If the buyer fails to obtain financing within this period, the OTP becomes null and void, and the sale cannot proceed. To avoid this, buyers should ensure they have pre-approved financing, and sellers should verify the buyer's financial stability before accepting the offer.
Failed home inspection
A home inspection is a critical step in the property-buying process. It reveals any structural issues, necessary repairs, or potential hazards. If significant problems are uncovered during the inspection, the buyer may withdraw from the sale or renegotiate the terms.
It could happen that during an inspection, the buyer discovers extensive water damage and mould in the ceiling. The cost of repairs may need to be lowered for the buyer, leading them to cancel the deal. Sellers can mitigate this risk by conducting a pre-inspection and addressing significant issues before listing the property.
Incomplete planning approvals
In some cases, the sale of a property is contingent on obtaining certain planning approvals or permits. This is especially true for properties with recent renovations, additions, or zoning changes. If these approvals are not secured, the buyer may withdraw from the sale.
For example, a seller might add an extension to their home but has not yet received the necessary municipal approval. If the buyer's mortgage lender requires this approval as a condition for financing, the sale could be jeopardised and forfeited. Sellers must ensure all planning permissions are in order before listing their property.
Importance of communication
Effective communication between all parties involved is vital. It's essential to avoid misunderstandings and delays. Poor communication can lead to unmet expectations, missed deadlines, and ultimately, a failed sale.
For instance, if the buyer's property practitioner does not communicate the need for an extension on the financing deadline, the seller might proceed with another offer, thinking the buyer is no longer interested. Both buyers and sellers should maintain open lines of communication with their property practitioners and each other to ensure a smooth process.
Tips for preparing as a buyer and seller
Being well-prepared can significantly reduce the risk of a sale falling through. Here are some tips for both buyers and sellers
For buyers:
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Secure financing early: Get pre-approved for a mortgage to strengthen your offer and speed up the process.
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Conduct thorough inspections: Hire a qualified home inspector who will be present during the inspection to understand potential issues.
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Clear communication: Keep in constant contact with your property practitioner and promptly respond to requests for information or documents.
For sellers:
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Pre-inspect your property: Identify and fix major issues before listing your home to avoid surprises during the buyer's inspection.
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Be transparent: Disclose any known issues fully and communicate openly with potential buyers.
Both buyers and sellers can navigate the property market more effectively and increase the likelihood of a successful transaction by simply dotting their I's and crossing their T's. Being proactive, maintaining open communication, and preparing thoroughly is key to avoiding the disappointment of a failed sale.
Contact Ikonic Real Estate today.
For Real Estate professionals you can trust and rely on for industry-related expertise, contact us below for more information.
If you are looking to live in Silver Lakes Golf and Lifestyle Estate, Silver Stream Estate, Lombardy Estate & Health Spa, The Ridge Estate, Six Fountains Estate, or Willow Acres Estate and surrounding areas, then Ikonic Real Estate is your preferred property practitioner to assist you in all aspects of the selling and buying process.
Office Number: 083 452 5599
Cell Number: 083 452 5599
Email: martin@ikonic.co.za
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Author: Bryce Anderson