It’s not uncommon for buyers to try and cancel a house sale after signing the contract, but what actually happens when you withdraw from a house purchase? What happens when a Seller decides they no longer want to sell their property, or the Buyer finds something else they love more after the Offer to Purchase (OTP) has already been signed? Can a party simply walk away from the transaction? Let’s explore this below …
The short answer: Not without legal repercussions
There really isn’t any way to sugarcoat it – if you pull out of your sale and it’s after the contracts have been exchanged, essentially you will be breaking a legally binding transaction between these two parties in the eyes of the law and there will be repercussions for this.
What Happens if the Buyer or Seller Pulls out of a House Sale?
In short, if the signature of the Seller and Buyer (or their Agent) appear on the offer to purchase, then both parties are bound to honour the contractual agreement. Not doing so puts you in breach of said contract. This means that you will probably have to foot the bill for some hefty penalties if you pull out at this stage – even if you’re backing out for reasons that are completely beyond your control.
Bear in mind that you could also lose your deposit completely if you’re the Buyer, and the Seller will also now be allowed to re-advertise the property for sale again. This means your hopes of securing the sale again will be dashed if there’s a new Buyer waiting in the wings. In fact, because the penalties for pulling out of a house sale can be financially significant, it’s always worth ensuring that you are extremely certain before you sign on that dotted line and commit to an OTP in the first place.
What Are The Possible Penalties You Can Expect?
It’s important that all parties keep in mind that an agreement of sale (the OTP) is a legal, binding document and that both parties are required to fulfil their responsibilities as laid out in the agreement. Therefore, there are a number of possible penalties that could be incurred should you cancel this agreement. These are often determined by the Offer to Purchase conditions and wording, for example:
- The aggrieved party could sue for out-of-pocket expenses
- The conveyancing attorney could claim wasted costs for time spent up to date
- The estate agent could also claim their full commission on the cancelled sale
What Reasons Are Considered Viable for Cancelling a Sale?
As discussed, if you’ve already signed the OTP, you can’t opt out without incurring legal repercussions simply because you’re no longer interested. There needs to be a legal basis for cancelling the agreement and some of these reasons could be:
- A suspensive condition was not met: These are conditions in the OTP that suspend the obligations of the contract (for all parties) until they have been fulfilled.
- A breach of contract: If this happens, the party not at fault can justifiably cancel the OTP and claim any legitimate damages or losses from the party in breach.
- The property is priced under R250,000: A buyer can cancel their Offer to Purchase, regardless of suspensive conditions or other clauses, on a home priced under R250,000. In this case, notification in writing is provided to the Seller within five days of signing (as stipulated in section 29A of the Alienation of Land Act). This cooling-off period does not apply to residential homes that are sold for more than the R250 000 threshold.
Being Sure Starts with Sure Representation!
As noted above, the cancellation of an agreement is a complicated matter with many possible repercussions. This is why withdrawing an OTP on a house in South Africa should always be done under the advisement of a qualified legal professional. This will ensure it is done in accordance with the relevant terms and based on merit. Furthermore, finding the perfect property for your needs starts with finding yourself expert property professionals to represent your needs. Speak to one of our real estate experts today and let’s make sure you’re closing the deal on a property that’s just right for you!
*Disclaimer: The purpose of this blog is to provide general information. RE/MAX SA advises individuals to seek out professional legal advice on this topic. RE/MAX SA cannot be held responsible for any decisions made based on the content of this article.