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Massachusetts Purchase and Sale Agreement

CRITICAL ASPECTS OF THE P&S AND WHY YOU NEED AN ATTORNEY
 Once the Buyer's Offer to Purchase has been accepted by the Seller of a home or condominium a Purchase and Sale Agreement is negotiated and drafted by the Buyer's attorney and the Seller's attorney. The Purchase and Sale Agreement is an incredibly technical, detailed, and complex document that must be tailored for each real estate transaction. It spells out the final agreement between the parties and generally supersedes the Offer to Purchase and any prior agreements between the parties. Like all real estate contracts, the Purchase and Sale Agreement must be in writing and adhere to specific statutory requirements to be valid. The Purchase and Sale Agreement is not merely a formality and any mistakes can cost either the Buyer or Seller thousands of dollars, result in the loss of the house or condo immediately or in the future, or result in years of litigation. It is therefore critical for both parties to hire  a competent real estate lawyer to assist with the preparation and review of this document.

 

PURCHASE AND SALE AGREEMENT DEPOSIT TERMS
Typically, on the day the Purchase and Sale Agreement is signed, the home Buyer will be required to place a deposit with the Seller's attorney (or realtor) usually equal to 3% to 5% of the purchase price. This deposit  is to help ensure that the home buyer does all that is necessary to obtain financing and close on the property under the terms of the Purchase and Sale Agreement (these requirements are commonly referred to as the Buyer's "due diligence"). If the Buyer fails to strictly adhere to these requirements, the Seller will likely sue for this deposit as his or her damages; i.e. the losses incurred for taking this house or condo off the market.

 

MORTGAGE COMMITMENT AND FINANCING CONTINGENCIES
The Purchase and Sale Agreement typically includes several contingencies including a mortgage contingency clause, which states that the buyer's ability to purchase the house or condo is contingent upon his or her ability to obtain mortgage financing (through a "commitment letter" from the Buyer's lender) by an agreed upon date (usually 1 to 2 weeks after signing the Purchase and Sale Agreement). If financing cannot be obtained by the appropriate date, then the home buyer must notify the Seller usually in writing to either cancel the transaction or extend this contingency date. If the Buyer fails to do so, then he or she may end up forfeiting his or her deposit to the Seller.

 

INSPECTION CONTINGENCY ISSUES IN THE PURCHASE AND SALE AGREEMENT
Their is also typically a contingency to allow the buyer to cancel upon receiving an unacceptable inspection report. It is always a good idea for the home buyer to attend the inspection so he or she can better understand this report. If the Offer to Purchase or Purchase and Sale Agreement are contingent upon an acceptable inspection, any defects in the home must be either repaired by the seller prior to the closing or the parties will need to renegotiate the terms of the agreement to keep the deal together. If the buyer has included the appropriate contingencies, and he or she is not satisfied with the home inspection, the transaction can be cancelled. Otherwise, the buyer might be out of luck and be forced to close on property that will require thousands of dollars to repair.

 

SEPTIC SYSTEM CONTINGENCIES IN THE P&S
Finally, it is critical that appropriate language be included in the Purchase and Sale Agreement which specifies the responsibilities of each party with regard to any septic system issues. The Massachusetts Department of Environmental Protection requires that septic system inspections be disclosed by the home seller to the buyer. The inspection must be within the two years prior to the closing date or up to six months after the closing if weather conditions do not permit (e.g. during winter when the ground is frozen) and the inspection must demonstrate that the system does not pose a threat to the public health or safety. If no such certification is provided, the buyer may revoke the purchase contract. Learn more about the Disclosure Requirements in Massachusetts.

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