Home Buying and selling FAQs
The Real Estate LawTrove provides some Frequently Asked Questions and Answers about some of the legal issues that owners, lessees and buyers of real estate may encounter in real estate transactions, especially in Massachusetts. These FAQs are not intended as legal advice: The law changes frequently as new cases are decided and statues are enacted. Consult your own attorney regarding any question you may have that is specific to your situation:
Your home quite possibly is your biggest asset. The sale of real estate can be quite complicated legally and fraught with pitfalls. For example, a significant period of time will often elapse between the signing of the contract to sell your home and the actual closing of the sale. During this time, the market may change, or the buyer may experience difficulty in securing financing. Such events may cause the buyer to wish to back out of concluding the purchase. If the buyer or the buyer's lender uncovers title problems, it will be the seller's responsibility to correct them prior to the closing. If the seller is unable to deliver good title timely, or if the purchase and sale documents were drafted or executed poorly, the buyer may be able to avoid concluding the purchase.
It is advisable to involve the services of an attorney early on in your sale in order to ensure that the sale contracts are drafted in such a manner that is enforceable, and that the seller is able to deliver good title at closing.
As with any legal matter, an attorney is obligated under the attorney code of ethics to represent the client ethically and zealously in order to bring the sale to a conclusion and always to act in the best interests of the seller. It is the responsibility of the seller to provide first drafts of all sale documents, and to hold all deposit monies in escrow. An attorney will therefore provide the buyer with document drafts, negotiate them to a conclusion, ensure that all documents are executed, and hold all deposit monies in escrow. The seller's attorney will assist in shepherding the sale to a conclusion and represent the seller at the closing. If the seller is able to dispense with the services of a real estate broker, the attorney may also stand in for certain of the much higher-cost services of a broker.
As seller, it is always your goal to lock in a firm price and to agree upon the terms and conditions for the sale of your house to occur at a fixed time and location, and to take a deposit as earnest money. You will also wish to ensure that your buyer is capable of delivering the purchase price at the agreed upon time and place. This occurs with the use first, of an Offer to Purchase signed by both sides and accompanied by a small deposit (typically, $500 - $1,000), and secondly by a Purchase & Sale Agreement ("P&S") accompanied by a substantial deposit (5-10% of the sale price inclusive of the initial deposit). These deposits must be held in escrow pending closure of the transaction, usually by the seller's attorney or, if there is a real estate broker involved, by the broker.
The Offer to Purchase followed by the Purchase & Sale Agreement ("P&S") are customarily used in Massachusetts to sell your home. Both are legally binding documents. The seller may also offer a "Seller's Disclosure Statement" at the time of showing the property. In Massachusetts, though a seller's disclosure is not legally required, the seller may provide one voluntarily in order to minimize the number of problems left to be discovered by the home inspector. Fewer problems in turn will reduce the amount by which the buyer may negotiate the purchase price downwards prior to signing the P&S.
6. What difference is there between an Offer to Purchase and a Purchase & Sale Agreement?6.
The Offer to Purchase specifies fewer details of the obligation to buy and sell. Since it comes early, it will probably contain more contingencies such as that of a home inspection and mortgage commitment. It is important to remember, however, that the Offer to Purchase is just as binding a document as the P&S. Usually the Purchase & Sale Agreement is signed once the contingencies in the Offer to Purchase are eliminated. A signed P&S replaces the Offer to Purchase as the binding document to enforce the sale. With the signed P&S in hand, and a deposit in escrow, both parties can begin to prepare for the closing.
During the period before the closing, your attorney will assist you to deliver all that you promised in the P&S, including a deed and clean title. Your attorney should also hold all earnest monies in escrow for the transaction, and review the HUD settlement statement with the buyer's or bank's attorney prior to the closing on your behalf.
Your attorney can accompany you at closing to walk you through all documents, ensure that you receive good funds, and are correctly charged and paid. There may also be last minute negotiations over details with respect to specific commitments in the P&S. If it proves inconvenient for the seller to attend the closing, the lawyer, acting under a power of attorney, can attend in lieu of the seller, and execute sale documents on the seller's behalf. If the seller wishes to attend, his attorney will review all documents and interpret them for the seller prior to the seller's executing them.
An attorney's services are personal and specific to each transaction. Part of what your attorney might need to know before offering an estimate is the property location, its history, whether there are any known title encumbrances, how the seller currently holds title, a sense of who the buyer is, when the closing is likely to take place and where, and other intangibles. Once a seller provides an attorney with an understanding of some of these factors, your attorney may be willing to provide an estimate of the maximum that fees are likely to reach, subject, of course to any contingencies of which the attorney is unaware at the time of the discussion.
The road to selling your home offers an interesting journey. Each seller should bear in mind that the completely smooth transaction is a rarity: There almost always occur twists and turns along the way where it is useful to be able to access the guidance and advice of a seasoned real estate attorney.