Our off grid journey SA: In Looking For Land Part 4, we make a decision to buy a plot of land. Here’s how we submit our Offer To Purchase…
So Many Questions
Russ & I sat on Marinda’s Se Veranda after our final viewings, and truly didn’t want to leave. We loved it here.
And Plot 94 was the best property we’d seen of all. It meant challenges, for sure. Most of which we probably couldn’t even guess at yet!
We debated, and I (of course), scribbled lists, notes and sums as we worked around the idea of committing. I drew up some extremely rough costings and layouts, looking at viability. I sketched out our main goals.
- Growing food and medicinal plants,
- Establishing fruit and nut trees,
- Keeping fowl,
- Living comfortably, as well as
- Having an intimate healing retreat venue.
Could the smaller plot really work?
Were we ready?
Was it the right place?
Should we keep looking?
We thought about all the places we’d seen and researched. We thought about all the places we hadn’t yet visited. What if there is a more perfect place for us, just around the corner? But what if THIS spot is it, and we pass it by? And could we end up in a never ending search, never committing to anything?
Off Grid Community
We both strongly feel that the off-grid community already here is a massive bonus point.
While the internet can provide a rich plethora of supportive and informative community groups, it’s so much more meaningful and relevant in a physical community.
There is also a sharing of knowledge and experiences first hand in the same environment.
While every-one here has their own plot of land to do with as they please, people can trade with each other depending on what harvests and skill sets they have to offer.
Self sustainability means different things to different people. But to us, we believe you shouldn’t try do it all yourself. We are, after all, a pack species!
For example, I personally have no interest in becoming a highly skilled builder, although I’d be happy to learn the basics. There are highly skilled builders already here in the community. I have a huge passion for growing edible and medicinal foods. While not every-one shares that, they could benefit from my knowledge and what I grow.
In this way, within myriad areas of life, there is a delightful opportunity to be self sustaining within a small community.
Decision Made
My heart was shouting loud and clear that we’d found our new home! But knowing my impulsive nature made me doubt myself.
When Russ confirmed his heart felt the same, we decided to do it. We’d put in an offer!
Decision made, we hastily called Abrie (now thinking about those “other offers already on the table” – ah, estate agents are good at their job) and left a voice message.
My mind was in overdrive – we had so much to think about!
The drive back to Cape Town, as we finally pulled ourselves away from the Veranda, was alternately full of excited conversations and long stretches of stillness.
There was a sense of rightness and peace underneath the overwhelming excitement that would rise up and quiet us, as we pictured the area, the land, and dreamed our dreams.
Filling in the Offer To Purchase
Abrie had Chas Everitt send through a blank copy of their “standard land purchase offer” agreement for us to fill in and complete.
I ended up crossing out a lot of clauses I felt were incorrect or irrelevant.
That might immediately make me sound like a fussy, overly-particular kind of human.
But remember, the offer to purchase is YOUR offer – you can be as particular as you choose.
I’ll discuss the changes I made so that you can get an idea for what can be done, but remember that every offer to purchase contract is unique and will have its own interesting quirks.
The important thing is to really read it all thoroughly, and ask questions if you’re unsure about something.
Making Changes to an Offer To Purchase
Generally, changes mean you are crossing out sections of the Offer To Purchase. In this case, you want to cross out the relevant section and initial next to it. If you are buying as a couple or group, every person who is part of the Offer to Purchase needs to initial next to it.
If there is wording you want to amend or add, you will need to either write that in manually or ask the estate agent to type up a fresh version of the Offer including your notations.
You are offering the seller a deal, you can make that deal whatever you like. That doesn’t mean the seller will accept it, but if they do, you are both in a legally binding contract to follow through on what it says.
Estate Agents Fees
Estate agents always charge a fee for facilitating the sale. The standard is that this fee is for the seller to pay, since the agent is working for the seller.
The agent advertises the property, screens potential buyers, conducts viewings, and brings offers to purchase to the seller. In return for this service, the seller gives the agent a percentage of the sale price. If the seller doesn’t sell the property, the agent makes nothing for their effort.
The first thing that I spotted was a clause that specified various circumstances in which we, the purchaser, would be liable for the estate agent’s fee! Nay, I said to that!
So I crossed all of that out, and Russ & I initialed next to each crossing out. In the email to Abrie, I explained what I’d done and why:
“Estate agents’ commission is a professional fee that the seller agrees to pay the estate agent to market and sell their property. As the purchaser, we do not agree to pay the estate agent’s fee or part thereof should the agreement be cancelled by mutual consent since no fault has occurred, nor has a sale occurred. However, we agree that if the sale falls through due to either party (whether seller or purchaser) defaulting on the agreement, it is fair that the defaulting party pay the agent.
I’ve therefore struck the following sections from clause 8:
b) ‘for any reason whatsoever (including mutual cancellation)‘
c) ‘In the event that this agreement is cancelled by mutual consent of the seller and the purchaser, the purchaser and seller will jointly and severally be liable for payment of the agent’s commission to the agent.‘
d) ‘or if this agreement is cancelled by mutual consent of the seller and purchaser.‘
e) ‘or by mutual consent between the purchaser and seller.’ “
Property Description
The second clause I spotted that I wasn’t comfortable with was titled “Incorrect Property Description”, which basically said that we confirm that we’ve been shown and knew the property, its beacons, size, etc. And, critically, if we’d been misinformed about the property’s size and its boundaries, that neither the seller or agent were liable for that.
Remembering how loosely property boundaries are described in Suurbraak, I was not even a little sure that what we’d been shown was correct. What if the property turned out to be even smaller than we’d been told?! We’d be bound by a legal document (be aware that an offer to purchase is fully legally binding) to pay the full price.
I crossed the whole clause out, Russ & I added our initials, and I explained to Abrie:
“We have not been shown the correct beacons and extent of the property. The sale is pursuant to a professional land surveyor providing us with this information.
For this reason, I have struck section 5 “Incorrect Property Description”. It is of mutual benefit to strike this clause, because if the survey reveals the property is significantly bigger than what has been told to us, he has the option of requesting a larger sum, whereas if the erf is significantly smaller, we have the option of cancelling the sale or requesting a lower price with no fault on our part.
For clarity to the seller, we’ve been told the erf is 2008m2. We’d consider an excess of 200m2 variance on either side of that to be “significant”, but we are negotiable on this if the seller would like to discuss a different variance. ”
(Note that I have been specific about what we would consider a big variance – it is important to be as detailed and clear as possible.)
Offer To Purchase: Other Conditions
You’ll notice I mention there that the “sale is pursuant to a professional land surveyor”. This relates to the last part of the offer I edited – “Other Conditions”.
Generally all contracts have a few lines at the end under the heading ‘Other Conditions’. Here, both the seller and purchaser can list certain specific things related to the sale. For example, if you’re buying a house, the seller might stipulate that you have been made aware of a leak in the roof. Or you might stipulate that the stove is included in the sale.
If these conditions are not met, the agreement is broken (and whoever broke it is considered to be in breach of contract, which means legally the other party can claim damages etc).
How To Add In Conditions
When adding in items like this, make sure you cover 3 aspects for each condition:
- WHAT YOU WANT (with as much defining details as possible);
- WHO IS RESPONSIBLE for actioning it – and who is responsible for paying for it if it costs money;
- WHEN IT MUST HAPPEN (by setting a time frame, you’re not caught in limbo being locked into an agreement waiting endlessly for something to happen before it can proceed).
Our Conditions
In this section I added a “suspensive clause“. That means things that have to be fulfilled / conditions that have to be met before the transfer can occur.
Suspensive clauses could be something like: we need to sell our current home before this sale goes through (in other words, the seller would need to agree to wait). Or it could be, the seller first needs to fix the roof. To word it, you make sure you have covered the 3 aspects above (what, who and when).
Our offer had the following conditions:
a) The Seller guarantees that no usufructs nor servitudes are registered to or exist on the property.
(This is a very useful one to add when buying a rural plot of land or farmland)
b) This Offer to Purchase is subject to the following suspensive condition:
The Seller agrees to enlist a registered professional surveyor to mark the borders of the property, such survey to be for the Seller’s cost, and the property’s full and correct extent, boundaries and location made clear to the Purchaser from the results of the survey within 35 days of acceptance of this agreement.
Should the survey reveal a significant variance of more than 200m2 in the extent and/or location of the eft and/or its boundaries against what was shown to the Purchaser by the Agent, the Purchaser may choose to cancel this agreement with no liability or default incurred.
So in condition b) you can see WHO – the seller (both to action and to pay for). WHAT – get a surveyor to mark the property borders. WHEN – within 35 days.
I then go on to clarify what happens once the action is completed – since it affects our willingness to buy the property. Without this, we would get the surveyor’s results, but be committed to following through with the purchase even if the results are not acceptable to us (e.g. a much smaller property).
Savings or Loan?
We also needed to make a decision about how we were going to pay for the property, as this would have to be specified in the offer.
As mentioned in Part 3, we had two options:
- Cash in most of our life savings, leaving very little to build with, or
- Extend our existing home loan on our “retirement plan” property in Cape Town, increasing the monthly loan repayments and the interest charged while we paid it back.
If we were extending our existing Access Bond (home loan), this would take time to apply for and get approved. And we’d need to add in that the sale would be pursuant to this application being approved by the bank).
At first, this seemed like the best way to move forward, since it would leave us with savings to work with (and that seemed a little less scary). But the large monthly repayments looked daunting.
I looked at what our investments and savings were likely to earn in terms of interest (how much they were likely to grow).
I pondered how much the land would be worth in a few years time.
The question I was trying to answer was “would the rate of interest earned on investments outperform the property value increase over time or visa versa“.
And it was impossible to answer for sure, since I’d be speculating on both growth rates well into the future.
New Approach
I put the question to a few friends – who left me with a 50/50 split in votes for each option.
I was driving home from work when the answer finally struck. I’d been looking at it all wrong!
The question wasn’t simply “would the rate of interest earned on investments outperform the property value increase over time or visa versa” – it was
“would {the rate of interest earned on investments less the home loan interest rate} be greater than the property value increase over time, or visa versa“.
If we were to choose option 2 and keep our savings, we’d be extending the home loan, and we’d be charged interest.
So our savings growth would need to exceed the cost of interest charged on the loan before it could be considered real “growth”.
On its own, the land is guaranteed to appreciate (grow in value) since we’d be making improvements to it (starting with a blank slate made that easy to ensure), and we knew from other plots in the area that we’d gotten a fairly good price.
Finally, the additional repayment amounts on the home loan we’d be facing could instead be channeled back into savings every month.
So instead of paying off home loan interest for years, we’d be building our own savings back up. WOO! SOLVED!
Would the seller accept?
Russ read through and double checked it all (ALWAYS double check! And get some fresh eyes to double check too). Then we sent it off to Abrie, including our FICA documentation with the Offer to Purchase.
I immediately started to worry that I’d been too wordy and finicky about the contract.
What if the agent decided he’d rather push the owner to accept one of the other offers?
What if the seller thought we sounded like a headache?
What’s meant to be…
Abrie called us the next day, and was perfectly happy with what we’d sent through. Shew! What a relief!
He’d send it off to the seller immediately. Great!
The seller had a week to accept or decline our offer.
Abrie said he’d let us know as soon as he heard anything back.
And so began the never-ending week.
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