Can the Purchase Price change? After all, you have paid the minimum 10% deposit.
The Letter of Offer is always subject to contract and only becomes legally binding after signing the Sale Agreement. This means that after both parties sign the Sale Agreement and the Buyer makes some form of deposit payment, the Sale Agreement is deemed to be a duly executed Sale Agreement. This means that neither party can withdraw from the deal without being subjected to litigation.
Let’s repeat that.
The Letter of Offer is NOT the contract.
The Sale Agreement is.
What does this mean to you, as the Buyer?
If you have not signed the Sale Agreement, the Purchase Price is NOT locked in.
Warning: The Games People Play
This legal loophole has been used by both dodgy and respectable Agents to drive up property prices, especially for prime residential and commercial projects. The Agent issues several Letters of Offer to interested Buyers. Upon receipt of the signed offer and the 10% deposit payment, they then tell you verbally that you have secured your unit.
Is this an adequate response? Read on.
a. Back at the office, your deposit is evidence of a pre-sale; evidence that the property has been sold. Financiers like this proposition, and in some cases the Developer can access more funds for every pre-sale recorded.
b. In their mind, the Agent is targeting to be paid the highest commission possible. This means it is not in their best interest to lock in a Purchase Price they deem to be low. After all, why not advertise the development as 60% sold and see what happens?
c. Several months later, the Agent sends you a Sale Agreement a.k.a. The Contract. The shock! The horror! The migraine! You immediately see that your unit is for sale at a higher Purchase Price. The Letter of Offer that you signed, is now deemed to be an Expression of Interest. Ouch! And the Agent tells you that the Seller is within their rights to change the price as the document you signed is not legally binding.
d. And the irony is, this whole process is legal. Legally frustrating, more like it. The explanation given for this whole circus is that when you signed the Letter of Offer, you made an offer. But, it wasn’t accepted by the Seller. So no contract exists. This is why rarely are Letters of Offer signed by the actual Seller – be aware of this.
Some Buyers have experienced the frustration of Sale Prices that doubled.
At this point, you can become truly frustrated.
Should you pay more for the home you have fallen in love with? Or should you ask for your deposit back and lick your wounds in private? Review this loophole and now that you know better, do better.
Do you need an independent review of your Letter of Offer or Sale Agreement? Kindly reach out and we will do our best to give you feedback within a reasonable time.
Be aware and don’t fall for this trick! Once you have paid your minimum 10% deposit, chase the Agent for the Sale Agreement, legally lock in your Purchase Price and secure your interest accordingly.
If you found our guide to be useful, do consider connecting with us. We are skilled at walking with you through your property investment adventure.
Go back to Part 1 – Guide to Investing in Property in Kenya >>
