Difference between Offer to purchase and Option to Purchase
There are marked differences between an offer to purchase. Many Property Buyers that we encountered in our Property Loan financing cases told us, “Yes, we have paid a 1% for the Option to purchase”. Upon further probing and checking, they realized that they only paid the Offer to purchase.
Why is Offer to purchase different from Option to purchase?
Offer to purchase is NOT an option to purchase. When you make an OFFER, you unilaterally make an offer. However this offer binds the property buyer and not the property seller!
And we have been very unhappy with these types of contract clauses, I think the CEA needs to act on this aspect, to make sure that all Offer to purchase to follow a standard clause and template to protect the property buyers rather than let anyone determine the terms of the offer to purchase.
If you look at their clause 3, it states that: -
“The sale of the above property is subject to the Option to purchase being approved by both the vendor and me/us.”
This above clause looks generally fine.
Clause 4 says: -
“Within three working days, by 4pm (25/04/2012), the vendor of the above property must either accept or reject this offer failing which, this offer shall lapse. If rejected, the option money will be returned to me/us without any interest thereon and thereafter neither party shall have any claim against the other. If accepted, the vendor shall deliver to me/us the option to purchase agreement duly signed by the vendor within the time stipulated above.”
Now what seems to be wrong with this Offer to purchase?
Clause 3 spoke about both vendor and property buyer agreeing on the Option to purchase (OTP), Clause 4 spoke about commitment from the seller, this looks fine too.
How about if the Singapore property buyer do NOT agree with the Option to purchase? Why not attach an Option to purchase together with this Offer to purchase and stipulate that this will be the terms and conditions of the option to purchase?
There seems to be a deliberate absence of mention about the Property Buyer rejecting the option to purchase. Will the property buyer get their option money back?
This clause puts the property buyer at risk of losing their 1% option to purchase deposit.
This is the typical type of unfair clauses in the Singapore property market which we hate to see.
This seems to want to quickly expedite the sale of the property, if not, make the buyer part with their 1% option money to tempt the seller into committing a sale. In the event that the seller agrees and the property buyer do not agree to the terms and conditions to the option to purchase, too bad, the property buyer will unlikely ever see their 1% hard earned money ever again. This 1% is usually split between the property seller and the property agent.
At Property Buyer Mortgage Consultants (www.SingaporeHomeLoan.net) we help property buyers go through the proper property buying process and we help property buyers find the best fit singapore home loan packages. SMS us at +65 9782 8606.