Are you planning to buy or sell a property in Massachusetts? If so, you’ll likely encounter the Massachusetts Association of Realtors (MAR) Standard Form Purchase and Sale Agreement during the process. This comprehensive document, often simply referred to as the “P&S,” is a legally binding contract that outlines the terms and conditions for buying and selling real estate in Massachusetts. This blog post will provide an in-depth overview of the MAR Purchase and Sale Agreement, helping you understand its importance and what to expect when navigating the Massachusetts real estate market.
The MAR Standard Form Purchase and Sale Agreement is designed to protect the interests of both the buyer and the seller in a property transaction. It includes crucial details about the property, purchase price, financing, inspections, title insurance, and more. As a result, it’s essential for both parties to thoroughly understand each section of the agreement to ensure a smooth and successful transaction. By delving into the intricacies of the MAR P&S, you’ll be well-equipped to make informed decisions and safeguard your investment as you embark on your real estate journey in Massachusetts.
Despite the MAR contract being more of a balanced agreement than other forms, which tend to be seller-friendly, a real estate lawyer is needed to review and customize it to the details of the transaction to ensure that the home buyer or home seller are protected. If you are selling or buying real estate in Massachusetts, please contact us if you need legal assistance.
Paragraph by Paragraph Explanation
Below you will find an explanation of the provisions in the MAR P&S.
Paragraph 1 – Parties
This paragraph identifies the buyer and seller involved in the real estate closing. If the buyer wants to take ownership in some other manner, they can have the deed go to another party or entity at closing as their nominee (like a limited liability company, trust, child, etc). However, the buyer is still responsible for their obligations, and they must guarantee the nominee’s performance. It’s important to identify the parties properly, especially if a trust, corporation, or LLC is involved. It is wise to always check the deed to be sure the seller’s name is correct.
Paragraph 2 – Description of Premises
This paragraph describes the property being sold, including land, buildings, and other structures. It also mentions the items that are included and excluded in the sale. A fixture, which is an item permanently attached to the property, is automatically included. To avoid confusion, any items in question (such as mirrors, major appliances, swing sets, or chandeliers) should be clearly stated as included or excluded.
Paragraph 3 – Purchase Price
This section outlines the total price for the property and how it will be paid, including the initial deposit, payments made with the Purchase and Sale agreement, additional payments, and the final payment due at closing. Typically, 5% in total deposits is standard, with $1,000 to $5,000 paid with the Offer to Purchase and the balance with the Purchase and Sale Agreement.
Paragraph 4 – Escrow
This section explains that the buyer’s funds will be held in an escrow account by an escrow agent. It also explains what happens if there is a dispute about the money in escrow and the responsibilities of the escrow agent. The escrow agent acts as a neutral party, usually the seller’s realtor or, if not, the seller’s attorney.
Paragraph 5 – Time for Performance
This paragraph sets the date, time, and place for closing the transaction. It emphasizes that each part of the agreement must be completed on time and explains how documents and funds will be held in escrow until the deed is recorded. The keys are released to the buyer, and checks are disbursed only upon the recording of the deed at the registry of deeds.
Paragraph 6 – Title/Plans
This section states that the seller will provide a clear and marketable title to the property. It lists any exceptions to the title, such as requirement that taxes will have to be paid, easements that do not materially impact the property, and that there are building and zoning laws governing what the owner can do. The seller must also provide a plan with the deed if needed for recording. Plans are typically needed when it involves a new condominium or new subdivision.
Paragraph 7 – Title Insurance
This paragraph says that the buyer’s obligations depend on the availability of title insurance at normal rates, with specific exceptions listed. This protects the buyer from potentially having to buy a property that may have a questionable title.
Paragraph 8 – Closing Certifications and Documents
This section requires the seller to sign and provide necessary documents at closing, as requested by the buyer’s attorney, lender, or title insurance company. These may include certifications related to occupancy, liens, financial statements, and legal requirements. This states that money owed by the seller toward liens will be held back from the proceeds, with standard releases for those liens then obtained post-closing if from the seller’s ownership. The last sentence mainly has to do with Homestead Rights that a non-owner seller spouse may have. The spouse should sign the P&S to release those rights even though not an owner.
Paragraph 9 – Possession and Condition of Premises
This paragraph states that the seller must give the buyer possession of the property at closing, free of occupants and personal property not included in the sale. The property must be broom swept (not professionally cleaned) and in the same condition as when the agreement was signed. The buyer has the right to inspect the property before closing, which is referred to as a walk-through.
Paragraph 10 – Extension of Time for Performance
This section allows for a 30-day extension if the seller cannot meet certain conditions, such as conveying title or delivering possession. The seller must make reasonable efforts to fix these issues but is not required to spend more than 0.5% of the purchase price to address the problem. If issues are not resolved, the buyer can have their payments returned, and the agreement becomes void.
Paragraph 11 – Nonconformance of Premises
If the property is damaged after the agreement date and is covered by insurance, the buyer can choose whether to proceed with the transaction. If they choose to proceed, they can decide how the seller should handle insurance proceeds for repairs or receive a credit towards the purchase price.
Paragraph 12 – Acceptance of Deed
The buyer can accept the title and property as is and pay the purchase price without reduction if there is an issue that the seller cannot comply with, like a title issue. Accepting the deed releases the seller from their obligations, except for those agreed to be performed later. In other words, obligations noted to “survive” the closing or delivery of the deed. This is the buyer confirming they are satisfied with the property and won’t look to the seller further post-closing.
Paragraph 13 – Adjustments
At closing, adjustments will be made for taxes, fuel value, water rates, etc., and the net total will be added to or deducted from the purchase price. These items are adjusted at closing, with one party crediting the other for what they owe toward a bill or an overpayment that could have been paid. Condo fees would also be adjusted.
Paragraph 14 – Acknowledgment of Fee Due Broker
The seller and buyer acknowledge a fee for the broker’s services, which the seller will pay at closing. The buyer and seller also confirm receipt of notice regarding the broker’s agency relationship. A typical commission is a total of 5% with the buyer’s and seller’s agent splitting that 50/50.
Paragraph 15 – Buyer’s Default
If the buyer breaches the agreement, the money in escrow will be paid to the seller as liquidated damages, which will be the seller’s only remedy. A clear example of a breach would be the buyer getting cold feet and not closing without a reason covered under the contract.
Paragraph 16 – Buyer’s Financing
The buyer’s obligation to purchase is conditioned upon obtaining a written mortgage commitment, which is a formal agreement from a lender to provide a mortgage loan to the buyer so long as certain listed conditions are satisfied (reviewing these conditions is critical). If the buyer cannot obtain financing, they may terminate the agreement and receive a refund, so long as they have diligently pursued a mortgage and are terminating before the expiration of the date set forth in this paragraph.
Paragraph 17 – Inspections/Survey
The buyer has the opportunity to conduct inspections and accepts the property’s condition as is. If the results are unsatisfactory, the buyer may terminate the agreement and receive a refund. The inspections will normally be done prior to signing this contract, with this paragraph then being stricken.
Paragraph 18 – Lead Paint Laws
For properties built before 1978, the buyer acknowledges the possible presence of lead hazards and the right to inspect for dangerous levels of lead. Disclosures must have been given to the buyer by the seller at the time of the offer, explaining lead paint and what the seller may know about its presence.
Paragraph 19 – Certificate of Approved Installation
The seller must equip the property with approved smoke and carbon monoxide detectors and furnish a Certificate of Approved Installation from the local Fire Department. The certificate is good for 60 days, and this should be done well in advance of closing in case the system fails, so another appointment can be obtained. This will otherwise delay the closing.
Paragraph 20 – Warranties and Representations
The seller makes certain representations and warranties regarding the property, such as the presence of a septic system or underground storage tank. This paragraph makes it clear that all representations are in this agreement and that if the buyer is relying on something said outside of this agreement, it will be treated as though it didn’t exist. This is called a merger clause.
Paragraph 21 – Notices
All notices required or permitted under the agreement must be in writing and delivered in person, sent by certified mail, or sent by an overnight delivery service. This paragraph explains how notice must be given. Typically, notices are sent between the attorneys for the buyer and seller by email or fax without the need for other parties to get involved.
Paragraph 22 – Counterparts, Electronic Delivery, and Agreement Construction
This Agreement can be executed in separate parts and signed through electronic delivery. It is governed by Massachusetts law, represents the full agreement between parties, and can only be modified through a written amendment signed by both Seller and Buyer. It also states that the practice and title standards issued by the Massachusetts Real Estate Bar will be used to construe the parties’ obligations throughout the transaction if applicable.