Here is a quick review of the fundamentals of a typical home purchase in the Commonwealth of Massachusetts. (Follow the hotlinks for content on finding the right real estate agent and home inspections in Massachusetts which are not addressed below.)
Get pre-approved for mortgage financing
Getting pre-approved for mortgage financing early in your home search will greatly help you in your efforts to buy a home. A mortgage pre-approval letter serves to clearly identify how much of a mortgage loan you can obtain. It also will give you a reliable target purchase price on which to focus. Your pre-approval letter is the means by which you’ll prove to listing agents and home sellers that you have the financial buying power you need to purchase the home you want.
You can download a guide to home mortgage financing here or by following the hotlink in the image above.
Pre-approval versus pre-qualification
Getting pre-approved will require documentation of your employment, income, debt, assets and credit history. There should be no charge or obligation for the service of issuing a pre-approval. Beware of obtaining a mere “pre-qualification” letter. Pre-qualification is a much less rigorous process than true pre-approval . A “pre-qual” letter will carry much less weight with agents and home sellers than a pre-approval letter.
Contracting to purchase a home in Massachusetts
Buying a home in Massachusetts typically involves a two-step process involving two different legal contracts. The first contract the seller and you will sign is the Offer Agreement (the “Offer”). A number of days after the Offer (usually during which time the home inspection is performed), the seller and you will sign the second contract called the Purchase and Sale Agreement. (See below.)
The Offer in Massachusetts is a preliminary purchase contract in writing. Note that even though preliminary, the Offer is a binding contract. So read it carefully.
The Offer should properly identify the property to be purchased, the price to be paid, and the parties to the contract, as well as set a closing date, establish an earnest money deposit as consideration (typically either $500 or $1000), and specify any contingencies.
Contingency clauses in Offers protect buyers
Contingencies are contractual “outs”, allowing one party to terminate the contract if a triggering event occurs . Contingency clauses in the Offer typically address the results of buyer’s home inspection and the ability of buyer to timely secure mortgage financing, but can cover other eventualities of importance to either of the parties.
The Purchase and Sale Agreement
The Purchase and Sale Agreement (the “P&S”) is a more fully-fledged real estate contract than the Offer.
The P&S typically is signed after the results of the home inspection(s) performed on the property are in hand. If there has been a price renegotiation or other concessions made by the seller due to home inspection issues, these will be incorporated into the P&S. The P&S will maintain in place the buyer’s mortgage financing contingency created by the Offer. The buyer typically makes an additional earnest money deposit (often the balance of five percent of the total purchase price) at the signing of the P&S.
The closing in Massachusetts is the event whereby the buyer takes formal, legal title to the property.
Up until the late 1990s in Massachusetts, the closing was a formal meeting between all parties to the contract, with counsel, held at the relevant registry of deeds or at the office of the closing attorney.
With the advent of electronic filing systems at each registry, the closing now can occur just about anywhere convenient for the parties. With powers-of-attorney often in use now, it is becoming increasingly rare for seller to have to meet buyer at physical closing anymore.
From the point of view of a buyer, the closing is a tightly choreographed event. You will be carefully and fully told what you need to do. There will be quite of lot of paperwork for you to sign. And you will be told beforehand what additional funds you will need to bring with you. To be safe, it is always advisable to bring your checkbook, just in case some additional payments are needed. A photo-ID is also a must.
Once the deed to the property has gone of record at the relevant registry of deeds, you own the home and can move in – congratulations!
Have any questions? Warren Reynolds will be happy to provide answers – call or text him at 508-561-6259.