In the current South African residential property market, certain sectors are now in exceptionally strong demand and are slanted in favour of the seller.
This, says Wayne Albutt, Regional Sales Manager for the Rawson Property Group in the Western Cape, has resulted in the growing use of a clause sometimes referred to as the 72 Hour Clause, but more correctly called the Acceleration Clause.
“This clause”, says Albutt, “is often inserted in the Agreement of Sale if the buyer’s offer is conditional on them getting a bond or first having to sell their property and the seller and their agent are confident that the demand for the home is so strong that they will be receiving other offers.”
The clause enables the seller to accept the initial Offer to Purchase but to go on marketing the property. If they or their agent receives a further, unconditional offer, e.g. a cash offer, the initial purchaser will be given from a specified date three days (72 hours) to secure their bond or the sale of their property, failing which their offer is no longer valid, unless they waive the suspensive conditions.
This acceleration of the suspensive condition, says Albutt, can very often be achieved if the seller has a good bond originator or a close relationship with their bank (in the case of a bond). In general, however, bond approvals takes longer than 72 hours, so the chances of the offer expiring are fairly high.
In some cases, said Albutt, the second offer can be lower than the first and still be accepted by the seller because it has no suspensive conditions and will give a legally enforceable, immediate sale.
“All the legal arrangements surrounding this clause”, says Albutt, “are quite often not fully understood by agents, sellers or buyers — which can lead to problems. Buyers can refuse to have such a clause in their offer but this may cause the seller to decline the offer, particularly if they know they are in a hot market.”