Purchase and Sale Agreements in Massachusetts

Buyer’s FAQ

Why did we sign an Offer to Purchase only to re-negotiate everything again in the Purchase and Sale Agreement (“Why did we sign an Offer to Purchase only to re-negotiate everything again in the Purchase and Sale Agreement (“P&S”)?

My mortgage contingency is for 80% of the purchase price, but I don’t want to borrow that much – what should I do?

There were a few things that our home inspector told us about during the inspection. The broker said that those items were considered when the price was set. What should I do?

What if the seller hasn’t completed the repair items on the closing date, or can’t close for some other reason?

1. Why did we sign an Offer to Purchase only to re-negotiate everything again in the Purchase and Sale Agreement (“P&S”)?

While the Purchase and Sale Agreement is the formal and final agreement between Buyer and Seller, the Offer to Purchase firmly sets several key elements of the transaction. The purchase price, deposit amount, date of closing, mortgage loan amount and the buyer’s right to inspect the property are usually all defined in the Offer to Purchase. Revising terms in the P&S that were determined in the Offer to Purchase can be difficult. That said, it is important that the terms of the P&S are carefully reviewed and fully negotiated to create the most favorable terms achievable.

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2. My mortgage contingency is for 80% of the purchase price, but I don’t want to borrow that much – what should I do?

The buyer’s mortgage contingency is often the most critical aspect of the P&S. The contingency is designed for the buyer’s protection. If a buyer cannot get approved for a mortgage loan up to the stated amount by the deadline date, the buyer is entitled to cancel the deal with a full return of their deposit money. A buyer may, however, choose to borrow less than the contingency amount, and pay the difference from their own funds. This is common when a buyer is using the proceeds from the sale of their prior home toward the purchase of a new home.

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3. There were a few things that our home inspector told us about during the inspection. The broker said that those items were considered when the price was set. What should I do?

Parker|Scheer recommends every buyer insist on a home inspection by a certified professional of their choosing. A good home inspector will assess the condition of the structure, foundation, systems and utilities to determine any possible hazards, liabilities or imminent repairs. The home inspection should be completed before the Purchase and Sale Agreement is signed, and should be a right provided to the buyer in the Offer to Purchase.

It is within the buyer’s right to ask the seller to repair, correct and/or replace any problems identified by the inspector. If the seller refuses to perform the work or give a discount on price, the buyer can decide whether or not to go forward. A rule of thumb, however, is that a buyer likely be unsuccessful in getting a seller to agree to make repairs that should have been apparent to the buyer when the offer price was submitted (i.e. the house needs a paint job) As for other defects discovered during the inspection, we suggest that a buyer make a list in the order of priority to allow their attorney to effectively negotiate terms for the most important items.

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4. What if the seller hasn’t completed the repair items on the closing date, or can’t close for some other reason?

This situation can place the buyer in a difficult situation, but the buyer’s rights should be established in the Purchase and Sale Agreement. The “standard form” P& S Agreement establishes that if the seller can’t deliver good title or full possession on the closing date, then the seller has the option of either canceling the contract or extending for a reasonable period of time. Being that a buyer is committed to the transaction, a buyer should seek protection in the Purchase and Sale Agreement that will require the seller to deliver good and clear title. Parker|Scheer particularly recommends that buyers seek to protect their right to extend the closing date, provided they don’t risk losing their mortgage commitment.

Please browse the other links on this site for a discussion of topics including the offer to purchase, new construction considerations, condominiums, title insurance and related topics. Please feel free to contact our attorneys if you wish to obtain more information on any topic or discuss your particular transaction.

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Contact a Real Estate Lawyer

For more information on Purchase and Sale Agreements in Massachusetts, or if you need a real estate lawyer, please contact Rob D. Stewart. If you prefer, you can also telephone our offices in Boston seven days a week at toll free 866-414-0400.

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