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    Buying And Selling a Home In Massachusetts

Buying a home can seem like a daunting task to many. This transaction is the largest investment in most peoples lives and requires both financial and legal expertise. Although many residential real estate transactions are relatively straightforward, it is a good idea to have a basic familiarity with the legal issues involved to avoid problems.

The Offer

After finding a house you want to buy, usually with the help of a broker, you will be asked to sign a document called an offer to purchase. The offer you sign is a legally binding contract. When it is accepted and signed by both parties, the seller is obligated to deliver the deed and the buyer is obligated to deliver the purchase price. This document contains several important provisions:

1) Price: Most obviously it contains an offer to pay a certain price for the property.

2) Deposit: the offer states the amount of a deposit that will be included to validate the offer. The deposit is usually between $1000 and $5000.

3) Home Inspection: the offer states that it is contingent on the outcome of a home inspection. In the event it is discovered the house has issues, such as septic problems or termite damage, the offer will be revoked and the deposit returned.

4) Purchase and sale agreement: the offer usually states that it is conditioned on a satisfactory purchase and sale agreement. However, this clause isn't enough to terminate the agreement if problems do arise in negotiating the purchase and sale agreement.

5) Mortgage/financing: the offer states it is contingent on the buyer obtaining a mortgage even after they sign the purchase and sale agreement. It specifies the amount you intend to borrow, the deadline for applying for the loan and the deadline for getting approval from the bank.

Purchase and Sale Agreement

After both the buyer and seller sign the offer, another document called the purchase and sale agreement is drafted. This agreement is a long document which fully defines the rights and obligations of the parties. This is where the action takes place and it is a good idea to have a lawyer read it over and advise you before signing it. In general the purchase and sale agreement contains:

1) Parties: all of the people who hold title must be included. Your attorney and the bank attorney will do a title search to ensure no one else has a claim to the property. A common problem involves people who have died but are still in the chain of title as an owner of the property. The bank will buy title insurance to cover the amount of the loan, you may buy insurance for the remainder. For example, if the bank loan is $150,000 on a $200,000 home, the bank will only have insurance on $150,000 and you may buy insurance for the remaining $50,000.

2) Description of the Property: The property should be fully described. This includes not only the house and the lot size, but also everything included with the house; items such as refrigerators, shrubs, and chandeliers. Many deals have fallen apart because someone thought the garbage compacter was included. The seller should be aware that anything attached to the property such as lighting fixtures and washing machines are part of the property unless the purchase and sale agreement specifically gives the seller a right to those items.

3) Insurance: make sure the home is adequately insured in case it is struck by lightning before the deed is delivered.

4) Mortgage Contingency: This clause is in both the offer and purchase and sale agreement. Make sure it is clear how long the buyer has to secure a loan. Make sure it is spelled out what constitutes a denial by a lender. Since banks are increasingly stringent in requiring documentation, it is a good idea to prepare for delays and clearly articulate procedures for extending the period the buyer has to get financing. Fortunately, many buyers are prequalified or preapproved when they sign the purchase and sale agreement.

5) Deposit: a second deposit is due when the purchase and sale agreement is signed. This deposit is usually 10% of the purchase price.

The Closing

The closing, also called a passing, is where the deed is delivered and the purchase price is paid. The buyer brings a certified check for the down payment. The buyer is also responsible for a number of closing costs. These costs include the points on the loan which are fees charged by the bank for lending you money. A point equals one percent of the loan amount, thus on a $200,000 loan, one point would be $2000. You will also be responsible for paying legal fees to your own attorney and to the banks. Other costs include taxes and insurance.

There are a large number of forms at the closing including truth-in-lending statement from the bank, the terms of the note and the mortgage, the certification of title, as well as the plot plan and the deed description. Your attorney should be able to explain these documents if you have any questions.

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