Looking for Land – Part 4

In which we make a decision that will change our lives 
WARNING: This blog entry is many-words-no-pictures. Proceed at own risk. (I mean, I’ll add in some bad memes, but that’s about it)

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), made lists and scribbled notes and sums as we worked around the idea of committing. 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. A big factor that came up for both of us was that there was already an off-grid community here – which was a massive bonus point.

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 and Jacqui (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

Chas Everitt sent 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 immediately makes 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 properly, and ask questions if you’re unsure about something.

Making Changes to an Offer To Purchase

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 initialled 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 agents 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:

8. b) “for any reason whatsoever (including mutual cancellation)” 
8. 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.”
8. d) “or if this agreement is cancelled by mutual consent of the seller and purchaser.”
8. e) “or by mutual consent between the purchaser and seller”

The second clause I wasn’t comfortable with was titled “Incorrect Property Description” and basically said we confirm that we’ve been shown and knew the property, its beacons, size, etc. And 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 a lot smaller than we’d been told? We’d be bound by a legal document (be aware that an offer to purchase is 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.

Adding Your Own Conditions to the Offer To Purchase

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”. 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).
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. When adding in items like this, its important to specify:
1. WHAT you want (with as much defining details as possible),
2. WHO is responsible for actioning it – and who is responsible for paying for it if it costs money, and
3. WHEN it needs to be done by (by setting a time frame, you’re not caught in limbo being locked into an agreement waiting for something to happen before it can proceed).

Our offer had the following conditions:
a) The Seller guarantees that no usufructs nor servitudes are registered to or exist on the property.

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.

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:
1. Cash in most of our life savings, leaving very little to build with, or
2. 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 (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).

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.

After a few discussions with 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 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 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?

After Russ had read through and double checked it all, 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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