The Massachusetts Offer to Purchase

There are two main offer forms used in Massachusetts.

  1. The Massachusetts Association of Realtors (“MAR”) Contract to Purchase Real Estate (With Contingencies)
  2. The Greater Boston Real Estate Board (“GBREB”) Offer to Purchase Real Estate

Residential real estate purchases in Massachusetts are generally initiated by one of these two Offer Form.

It is VERY IMPORTANT to note that an offer can be considered a binding legal contract.

The following is a detailed look at each form:

 

1.  The MAR FORM

 

From: The Buyer’s name and address

To: These lines are used to fill in the seller’s name and address, if known. The name should be determined based on an examination of the public records by your real estate agent. If all else fails, the phrase “Owner of Record” is sufficient to complete this section.
Introduced by…: The name and brokerage of your real estate should be filled in here. This prevents any commission disputes among the agents. If you are working with a buyer’s agent, make sure their name is used here.

The BUYER offers….: This field calls for the property address. It would be wise to also include the MLS Number of the home as well as the square footage of both the home and the lot it is situated on.

1. Purchase Price: The price you are offering for the home, including the deposit amounts. Typically, a check for $1000 is made to bind the offer, and then an additional 3 to 5% of the offer less the initial deposit would be made upon signing of the Purchase and Sale Agreement. The balance would be paid “at the time of delivery of the Deed”, aka the Closing

2. Duration Of Offer: Sets the timeframe for which your offer is valid for. It is prudent to give the seller adequate time to respond. The offer can always be revoked before they have provided an answer.

3. Purchase And Sale Agreement: Sets the date by which the Purchase and Sale Agreement (“P&S”) is to be signed. A rule of thumb would be 3 business days from the expiration of the Inspection Contingency Date. The P&S expands upon the Offer and is the formal legal contract setting forth the specifics of the transaction. The transition from Offer to P&S essentially eliminates many of the Buyer’s contingencies that the offer may have contained, as the Buyer was afforded the opportunity to conduct their due diligence after the Offer and before the P&S.

4. Closing: Establishes the time, date and place of your closing: The time is genereally just held as a placeholder. The closing is typically scheduled for a time convenient for all parties. The tradition has been to conduct the closing at the county Registry of Deeds, but with the advance of technology, closings are now more frequently held at a real estate brokerage or the closing attorney’s office.

5. Escrow: Indicates who shall hold the deposit monies. Typically, the listing real estate brokerage will or the Seller’s Attorney.

6. Contingencies: The Buyer is afforded certain protection.

a. Mortgage Contingency
Along with the Inspection Contingency, this is the most important contingencies in the transaction and will be carried forward onto the Purchase and Sale Agreement. This clause is HUGELY important. It is an “out” clause for the Buyer to have their deposit returned if they are unable to secure a commitment from their lender for the mortgage. In order to exercise this clause, the Buyer must first apply for the mortgage by the specified date in this clause. And if there is an issue with obtaining the mortgage commitment, the Buyer must notify the Seller by the contingency date. Typically, if the commitment is not yet available by the date, the date can be extended by mutual agreement. The clause, as written, does not require the Buyer to provide the seller a denial letter from the lender, but the practical application of the clause often includes sharing the denial letter with the seller.

b. Inspection Contingency
Another crucial clause is the Inspection Contingency. This protection typically does not carry forward into the Purchase and Sale Agreement. The Inspection Contingency is another “out” clause for the Buyer to have their deposit returned if the Buyer discovers defects with the home during the home inspection. A threshold is set forth in the offer as to what cost to repair is the trigger to exercise the clause. Generally speaking, the dollar amount used in this clause is $1000, but we have seen this figure vary widely depending on the negotiations to that point. The lower the figure, the easier it would be for the Buyer to exercise their option to withdraw. The clause must also include a date by which the inspection must be conducted and then another date by which the Buyer must notify the seller of the intent to withdraw. It is advisable to conduct the home inspection as soon as possible, in order to allow time to negotiate any results into the P&S.

7. Representations/Acknowledgements: The Buyer is acknowledging receipt of certain disclosures such as Home Inspection and Lead Paint disclosures.

8. Buyer’s Default: If the Buyer backs out of the deal without exercising one of their contractual rights to do so, the Seller may retain the deposit but not be able to seek additional damages.

9. Additional terms….: This field is best used to detail what you do and do not expect to be included in the home sale should the offer be accepted. For example, the shed, the swing set, the washer/dryer, the chandelier. Also, reference can be made here to common contract additions such as a TRID Rider and a mortgage pre-approval letter from your lender. Most sellers require this. Contact us if you need a recommendation to obtain a pre-approval letter.

 

2. The GBREB Form

 

TO: These lines are used to fill in the seller’s name, if known. The name should be determined based on an examination of the public records by your real estate agent. If all else fails, the phrase “Owner of Record” is sufficient to complete this section.

Date: The date of your offer

From the Office of: The name and brokerage of your real estate should be filled in here. This prevents any commission disputes among the agents. If you are working with a buyer’s agent, make sure their name is used here.

The property herein….: This field calls for the property address. It would be wise to also include the MLS Number of the home as well as the square footage of both the home and the lot it is situated on.

Special provisions….: This field is best used to detail what you do and do not expect to be included in the home sale should the offer be accepted. For example, the shed, the swing set, the washer/dryer, the chandelier

1. The price you are offering for the home, including the deposit amounts. Typically, a check for $1000 is made to bind the offer, and then an additional 3 to 5% of the offer less the initial deposit would be made upon signing of the Purchase and Sale Agreement. The balance would be paid “at the time of delivery of the Deed”, aka the Closing

2. Sets the duration your offer is valid for. It is prudent to give the seller adequate time to respond. The offer can always be revoked before they have provided an answer.

3. Sets the date by which the Purchase and Sale Agreement (“P&S”) is to be signed. A rule of thumb would be 3 business days from the expiration of the Inspection Contingency Date. The P&S expands upon the Offer and is the formal legal contract setting forth the specifics of the transaction. The transition from Offer to P&S essentially eliminates many of the Buyer’s contingencies that the offer may have contained, as the Buyer was afforded the opportunity to conduct their due diligence after the Offer and before the P&S.
4. Closing date: Noon is just held as a placeholder. The closing is typically scheduled for a time convenient for all parties.

5. Indicates who shall hold the deposit monies. Typically, the listing real estate brokerage will or the Seller’s Attorney.

6. Time is of the essence, meaning the date are firm and binding.

7. Home Inspection and Lead Paint disclosures a buyer must sign.

8. Riders or Addendums, as in additions to the Offer. Common additions include the Contingency Addendum (a MUST) and a mortgage pre-approval letter from your lender. Most sellers require this. Contact us if you need a recommendation to obtain a pre-approval letter.

Buyer: Your signature line

It is necessary to also include The Offer to Purchase Contingency Addendum with your GBREB Offer.

The following is a detailed look at this form:

Mortgage Contingency
Along with the Inspection Contingency, this is the most important contingencies in the transaction and will be carried forward onto the Purchase and Sale Agreement. This clause is HUGELY important. It is an “out” clause for the Buyer to have their deposit returned if they are unable to secure a commitment from their lender for the mortgage. In order to exercise this clause, the Buyer must first apply for the mortgage by the specified date in this clause. And if there is an issue with obtaining the mortgage commitment, the Buyer must notify the Seller by the contingency date. Typically, if the commitment is not yet available by the date, the date can be extended by mutual agreement. The clause, as written, does not require the Buyer to provide the seller a denial letter from the lender, but the practical application of the clause often includes sharing the denial letter with the seller.

Inspection Contingency
Another crucial clauses is the Inspection Contingency. This protection typically does not carry forward into the Purchase and Sale Agreement. The Inspection Contingency is another “out” clause for the Buyer to have their deposit returned if the Buyer discovers defects with the home during the home inspection. A threshold is set forth in the offer as to what cost to repair is the trigger to exercise the clause. Generally speaking, the dollar amount used in this clause is $1000, but we have seen this figure vary widely depending on the negotiations to that point. The lower the figure, the easier it would be for the Buyer to exercise their option to withdraw. The clause must also include a date by which the inspection must be conducted and then another date by which the Buyer must notify the seller of the intent to withdraw. It is advisable to conduct the home inspection as soon as possible, in order to allow time to negotiate any results into the P&S.

Radon Contingency
Radon is a cancer-causing radioactive gas. You cannot see, smell or taste radon, but it may be a problem in a home. The Surgeon General has warned that radon is the second leading cause of lung cancer in the United States today. The good news is that a Buyer will have an opportunity to test for the presence of radon and can have their deposit returned if the test indicates a high level. Radon Act 51 passed by Congress set the natural outdoor level of radon gas (0.4 pCi/L) as the target radon level for indoor radon levels. The clause must also include a date by which the test must be conducted and then another date by which the Buyer must notify the seller of the intent to withdraw. This test can take a week or so before results are available so plan accordingly. An unfavorable test is generally not a deal-killer, as the Seller will often agree to install a radon mitigation system in the home that can quickly reduce the high level to a safe level. The cost to do so seems to be in the $1200 neighborhood.

Pest Inspection Contingency
This contingency is especially important for Buyers financing with a VA loan. A pest inspection is a requirement of a VA loan and the Buyer cannot pay for such as inspection in Massachusetts. It is advisable to determine the bearer of this cost in the offer form or at least between the real estate agents prior to full acceptance of the offer.
The Pest Inspection Contigency is yet another “out” clause for the Buyer to have their deposit returned if the Buyer discovers termite infestation in the property. The clause must also include a date by which the test must be conducted and then another date by which the Buyer must notify the seller of the intent to withdraw

Lead Paint Contingency Addendum
This clause affords the Buyer the right to conduct an inspection for lead paint. There is typically no requirement to do so and very few Buyers purchasing a single family residence intended to be used as their primary residence conduct such a test.
According to Mass.gov, under Massachusetts and federal law, owners and real estate agents must comply with Property Transfer Lead Paint Notification requirements when a prospective buyer or tenant with an option to buy is about to purchase a home built before 1978.
The aim of this requirement is to inform prospective buyers about:
The danger lead paint poses to children and adults, lead poisoning prevention steps, and the requirements of the Lead Law
To comply with both state and federal requirements, sellers and real estate agents must provide the Property Transfer Lead Paint Notification to a prospective buyer before signing a purchase and sale agreement.

In addition, they must:
1. Provide a copy of any lead inspection report, risk assessment report, Letter of Compliance, or Letter of Interim Control.
2. Tell the buyer anything they know about lead in the home.
3. Tell the buyer that, under the Lead Law, a new owner of a home built before 1978 in which a child under six will live or continue to live must have the home either deleaded or brought into Interim Control within 90 days of taking the title.
4. Sign, and have the buyer sign, the certification page of the Property Transfer Lead Paint Notification, which contains a checklist to ensure that the buyer has been fully notified of the requirements of the Lead Law.

Buying a Home | Real Estate Closing Attorney

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