Buying Into This Season's Housing Market

If you're looking to hit a homerun in this season's housing market, you need to cover all your bases. And the first base you need to cover should be legal! Whether you're a first time home buyer, trading up or down sizing, buying a home is a major financial investment, maybe one of the largest of your lifetime - so you can't afford not to be legally savvy! Before you start house hunting, check in with an attorney to find out what language needs to be included on the standard "Contract to Purchase" or "Offer to Purchase." There are several different standard versions of the "Offer" form out there - all of them are legal, but not all of them provide the protection you as the buyer need to have. For instance, you need to make sure the deal is contingent upon you having a thorough home, pest, lead and radon inspection. Make sure the Offer spells out that if you aren't happy with the inspections results, for whatever reason, you can rescind your offer. Buyers are often under the misperception that the only thing they stand to loose is the deposit they put down when they make the offer - but that's not the case! An Offer is a binding contract and you could be on the hook for the entire purchase price if you don't leave yourself an out. Make sure the Offer spells out all the terms and conditions of the deal. If you want the appliances to be part of the purchase price, say so up front.

You also need to watch out that you don't set unrealistic deadlines. Make sure you leave yourself enough time to get the inspections and to apply for a mortgage. If you may need to borrow a certain amount of money to buy the house, make sure there is language that specifically states your obligation to go through with the deal is contingent upon you getting a mortgage commitment for that amount! People sometimes short-change themselves and don't list the full amount they will need to borrow. Then if the loan falls short, they are still on the hook even though they don't have the funds. And if you must sell your existing home in order to buy the new house, make sure you include that as a contingency in the Offer.

Either the Seller's broker or their attorney holds the deposit. The money should be held in escrow until the property is transferred into your name and the deed recorded with the Registry. It's important to make sure there is language in both the Offer and the Purchase and Sale Agreement that specifically states if there is a dispute, the escrow agent (either the Seller's broker or attorney) will hold onto that deposit until everyone agrees in writing or a court orders a release of the funds.

The Purchase and Sale Agreement, commonly referred to as the P&S, is the next document you will negotiate with the Seller. This Agreement spells out in detail what is expected of both you and the Seller to make the deal go through. It also dictates what happens if the deal is delayed or one of you breaches the agreement made. Again there are various standard forms out there - some protect you as the buyer more than others. An attorney who practices real estate law will know exactly what to look for in a P&S and what language to add. They will also know if what the Seller's attorney is trying to add is the norm or if they are stretching things too far!

While there are many contingencies delineated in the Purchase and Sale Agreement, it usually is advisable to get the formal home inspections out of the way before you negotiate the P&S. That way, if you want a reduction in the price or something fixed by the Seller, you can come to an agreement before you pay an attorney to draw up the paperwork. The Purchase and Sale Agreement typically includes contingencies for issues such as getting a mortgage, qualifying for title insurance, and the house being unoccupied and in what is called "broom clean condition." And of course, any other contingencies listed in your Offer need to also be stated in your Purchase and Sale Agreement or they are technically "off the table" and no longer part of the deal.

Sometimes, a Seller needs time beyond the scheduled closing date to fix existing problems with the title to the property and requests an extension. The standard Purchase and Sale Agreements have language that allows a Seller up to 30 days to "perfect title" - that means to clear up any problems like making sure old mortgages that have been long paid off are discharged with the Registry. It's all too common that at the last minute, the Seller finds out that a former lender or bank forgot to file a discharge. It's reasonable and customary to allow the Seller the time to clear up any problems - but only so long as you, the buyer, doesn't loose your mortgage rate or incur extra costs with your mortgage company to do so!

In advance of the closing, have your attorney review the Deed prepared by the Seller. You need to make sure that the way you own the property makes the most legal sense for your particular situation. Right before the closing, do a thorough "walk through" of the property (this should be one of the contingencies in your P&S!). Make sure the appliances still are in good working condition, there hasn't been any damage done to the property during the time since you signed the Purchase and Sale Agreement (such as during the Seller's move out), and the Seller's belongings and trash have been removed. Then roll up your sleeves, sit down with your lawyer and check the settlement statement the closing attorney gives you very carefully. All the numbers should add up and there should be no surprises. Remember, if you cover all your bases, you should have no trouble buying into this season's housing market!

Copyright 2006 - Law Office of Gina M. Ghioldi, P.C.

In accordance with rules established by the Supreme Judicial Court of Massachusetts, this web site must be labeled "advertising." It is designed to provide general information for clients and friends of the firm and should not be construed as legal advice, or legal opinion on any specific facts or circumstances.The attorneys affiliated with the Law Office of Gina M. Ghioldi, P.C. are licensed to practice in Massachusetts. The availability of this site to residents of any other state or country is not intended as a solicitation of clients in those states or countries. Neither the receipt nor the distribution of materials, including the use of private electronic mail, constitutes the formation of an attorney-client relationship. An attorney-client relationship with The Law Office of Gina M. Ghioldi, P.C. or any of the attorneys affiliated with the firm will be formed only upon the execution and delivery of a retainer or contingency fee agreement and the satisfaction of the conditions contained therein. Materials distributed shall not, in any event, be deemed confidential or privileged. We cannot guarantee that all inquiries will get a response, and we cannot guarantee the accuracy of posted information, especially as to each individual situation. All responses in by e-mail are only for the education of the recipient as to the types of issues specifically relevant to their inquiry, and are not legal advice and should not be relied upon by the recipient.